London’s investor pool too shallow to tempt growing firms, say top chairs
Chairs at some of London’s top firms have slammed a dearth of investors in the City and cast doubt on its appeal as a hub for growing firms, in a new report surveying the mood of the City’s top executives.
The comments, drawn from a report by PR firm Tulchan surveying 35 board chairs – 26 of which were from FTSE 100 companies – underline the scale challenge facing London in its efforts to become a premier global listings hub.
Chiefs surveyed point to cumbersome and restrictive red tape in the UK alongside a far shallower active investor pool than the US that dissuades high growth firms from floating and growing in London.
The comments come as ministers and London Stock Exchange officials look to usher in a wave of reforms to boost the appeal of London as a listings hub. The bourse is currently looking to implement reforms set out in the Hill Review and Austin Review to ease the way that firms can raise cash in the Capital.
But the efforts have been rocked by setbacks as tech firms shun London in favour of overseas exchanges. Efforts to woo homegrown chipmaker SoftBank into a London-listing have reportedly hit the buffers since Boris Johnson’s resignation.
In the new report, one chief said that a lack of active investors was the main challenge dampening the appeal of London’s markets.
“My company is a high growth business competing with international high growth companies for resources and talent, requiring the support of active investors,” he said.
“Yet the reality of the London market is that the active pool is not large enough. Passive investors are less interested in the risk return of a growth portfolio and they also tend to take a less engaged view of companies.”
The size of the potential capital pool underlined “how much harder it is for high growth businesses to grow and flourish in London”, he added.
Another chief pointed to restrictions on executive pay as hamstringing the ability of firms to bring in talent to the City.
Some top City figures have been lobbying policy makers to lift restrictions on pay to allow firms to bring in the top executive talent.
City A.M. revealed earlier this year that Ron Kalifa, who authored a major review of the UK’s position as a fintech hub, wrote to the Treasury calling for restrictions to be lifted and bosses to be paid more attractive rates compared to international competitors.
One chair interviewed for the report said it was “difficult and becoming more so” to recruit CEOs and chairs to London listed boards.
“It’s not just the pay but also the scrutiny and second-guessing,” they said.
“Most CEOs after being CEO to a public company look to go into private roles where there is more freedom to implement and deliberate strategy over a long period of time and where the frustrations are fewer.”