The London Stock Exchange (LSE) has survived assault after assault in recent years. Predators like OMX and Deutsche Boerse have eyed a takeover of the City’s oldest and most important institution. Since then, upstart new entrants such as Turquoise and Chi-X have been battling to steal the LSE’s lunch by under-cutting the cost of trading. Turquoise is now part of the LSE, of course, but the threat of competition remains real. Yet the exchange continues to survive despite current market conditions.
Now it seems the LSE could face even stiffer competition if Vince Cable gets his way. The coalition government’s business secretary has proposed the remarkable “back to the future” notion of resurrecting the old regional stock exchanges as a way of helping small businesses to list and raise new capital. The argument goes that it is just too expensive for many to float, even on the supposedly cheaper Aim market. Big regional cities such as Birmingham, Edinburgh and Manchester have hosted thriving stock markets in the distant past.
But is it really necessary or even economically viable for them to return? Particularly when the LSE has its eyes turned increasingly overseas for future business development. A deal to work with its Indian equivalent was signed as part of David Cameron’s visit to the country this week, which included LSE boss Xavier Rolet.
Closer to home the amount of money raised on the LSE has been impressive during a turbulent July. Online grocery retailer Ocado raised £215m on admission, making it the fifth company to join the main market this month. It took the total money raised by new UK-based companies on the market to over £1bn in July. Vallar, the investment vehicle which floated on 14 July, raised £687m at admission. And GCP Infrastructure Investments raised £40m on the 22 July and is the first infrastructure fund of its type to float in the UK. Better Capital raised £67.6m when it joined the main LSE market from Aim on the 8 July, and Entertainment One also made the move from Aim to the Main Market on 15 July.
So far this year, there have been a total of 45 IPOs on the LSE’s markets, raising more than £5.5bn. Notable international floats included Essar Energy and African Barrick Gold.
All of this adds weight to the argument that the LSE remains the world’s most international capital market. It has around 600 overseas companies from almost 70 countries on its markets. More foreign firms could yet come if chief executive Rolet’s visit to India with the Prime Minister is successful.