Unleash real deregulation - or it's goodbye London
Businesses, homegrown or otherwise, are shrinking from Britain's capital market. Without a massive overhaul of the UK's regulators, the pattern will only continue.
London was dealt a two-punch knockout last week: fintech company, Wise, opted to shift its primary listing to New York, and Cobalt Holdings, a firm established to provide exposure to the commodity, withdrew its plans to float in London. The fact is that businesses, homegrown or not, are shrinking from our capital market. And without a mass overhaul of our regulators, the pattern will only continue.
These backtracks are far from a one-off. The names that have already ditched London are staggering: Darktrace, Just Eat, Tui, Arm to name a few. In fact, 88 companies said farewell to the Big Smoke in 2024.
If anything should be a wake-up call to fix our global competitiveness, this is it. Too much economic value is leaving our capital for other financial hubs, and in our meagre state of stagnation, sitting on our hands is not an option.
So, surely go-for-growth Rachel Reeves is on the case?
Kind of.
In March, Reeves sat down with Britain’s regulators, called them out for being overly bureaucratic and mandated bi-yearly reviews for each watchdog. While a step forward on the surface, this also highlighted the wider issue at hand. Deregulation is often shrouded in a load of waffly rhetoric, idioms and platitudes. We have the government vowing to “cut the red tape” and pledging to ensure the UK remains one of the best places “to start-up, scale-up, and to list”, all while tying up our watchdogs in tedious review processes. Frankly, our government’s “deregulatory” agenda is built on keeping the bureaucratic monster going.
Words won’t cut the mustard. What’s needed is stringent action.
First, we need another complete rewrite of our listing rules. Last July, new listing criteria was introduced to mitigate the IPO flight we’re seeing right now, but no matter what the chief of the FCA says, clearly, these rules aren’t working. We need to make it incredibly easy for businesses to cement their future in London and complete the already cost-intensive IPO process with minimal delays.
Second, we need to crunch down our watchdogs. Mel Stride recently cited that the current ratio of regulators to workers in financial services is 1:75 – a striking difference from the 1:300 in 2011. The UK's regulators are no longer facilitators of a helpful, safe, and considered capital market. They’re near ambushing any business wanting to make that leap to a public listing.
Now is the time to take action. As any keen reader of the The Financial Times, WSJ, Bloomberg, or CNBC – other financial publications are available – will tell you, the “Anywhere But the USA” trade is all the rage on Wall Street. The US, once the main battleground of capital flow, is now seeing a mass exodus of investment from its shores – and for as long as Trump reigns with an iron fist, portfolio managers will continue to de-risk themselves from US assets.
The fact is that the UK needs to capture some of this investment – and should be using it as an incentive for companies to list in London and strike inflated valuations. But without a streamlined IPO process that’s quick, efficient and supportive, it will struggle to do so. Companies will naturally be deterred from our shores, and our overbearing regulators are no doubt a factor.
In fairness, New York, for example, will naturally attract larger-scale public listings due to its deeper pools of capital and stronger, more enthusiastic culture of retail investment. We also shoot ourselves in the foot with pension funds that are fairly lukewarm to UK equities – and, of course, a stifling fiscal environment with an employer NIC rate of 15%.
But, on top of that, London is, increasingly, not considered a brilliant place to conduct business. And if our government is truly serious about “growth, growth, growth” – currently just one entry on Westminster’s list of trite phraseology – that will need to change.
Rachel Reeves, Starmer, and the rest of the New-ish Labour crew need a real deregulatory agenda that overhauls the way businesses view the London IPO process. Businesses, homegrown or not, are our ticket to becoming competitive again. We have to ensure they see London as their home.
Isaac Goldring is a Client Manager at thought leadership PR agency Profile.
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