The City of London Corporation has today (7 May) published a new research report calling on policymakers to take vital steps to improve the UK’s attractiveness as a destination for new listings.
London’s Equity Capital Markets Ecosystem finds that the UK should act to address the current disparity which exists with competitors, notably the US which currently accounts for more than half (53%) of fintech IPO listings.
The UK Listing Review, chaired by Lord Hill and launched by the Chancellor in November 2020, set out a number of recommendations in order to attract new listings.
The new report finds that interviewees largely supported proposals in the UK Listings Review to learn from international competitors and mirror some of their rules. This would include the introduction of a dual-class share structure for listing to bring more flexibility to founder-led tech firms in the Premium Market. This would allow founders to be better positioned to retain a greater shareholding in their companies.
Interviewees – including UK and international investors, Nomads, brokers, listing firms and stock exchange representatives – also welcomed the proposal to reduce free floats post-IPOs, which would bring more flexibility and attract new tech firms to list in the UK.
The report also identified other opportunities for the UK to make the best use of its key strengths and increase its attractiveness. These include:
- Strengthening expertise in growing sectors
- Taking advantage of growing opportunities from emerging markets
- Leading on ESG investment
- Capitalising on the benefits of a more digitalised IPO process
The report finds there is considerable demand for digitalisation of IPO processes. Interviewees agreed that London is set to be at the forefront of changes in the IPO process brought about by the pandemic, particularly in parts of the IPO process that have traditionally required extensive travel time and face-to-face meetings, such as investor roadshows. Survey results indicate that investors find video calls more efficient and a better use of time (68%) and would prefer to have more investor roadshows online going forward (64%). Over eight in ten (82%) of participants said they would be able to commit capital to an IPO without seeing a business’s management face-to-face.
According to the report, one of London’s key strengths lies in the combination of expertise in international and emerging markets, together with its tech and fintech knowledge. There is also an increasingly important trend towards sustainable investment, a practice particularly well developed in the UK – Europe’s largest market for sustainable and responsible investment.
Lord Mayor of the City of London, William Russell, said:
“The UK is a fantastic place to list businesses, with deep and liquid pools of capital and clusters of specialist expertise.
“We cannot, however, afford to be complacent. Other centres are vying with London to attract IPOs, especially from entrepreneurial and fast-growing sectors such as tech, so we must consider how to remain competitive.
“This report – following on from the recent UK Listings Review – sets out how we can encourage even more companies to list in London and boost our capital markets.”
Policy Chair at the City of London Corporation, Catherine McGuinness, said:
“Following a turbulent year for capital markets globally, the UK has demonstrated immense resilience as a place for raising equity.
“It is crucial that businesses around the globe can access the UK’s equity capital markets to support growth and drive investment following the Covid-19 pandemic, and we should act now to ensure that the UK remains internationally attractive as a listing venue, while maintaining high regulatory and governance standards.
“It is particularly crucial that we address these challenges as a priority, to ensure London can continue to provide a vibrant economy, delivering much-needed funding for a range of businesses in the UK and across the world.”