Week in Business: Warning lights in the City as another firm quits London for New York
Another day, another London listed business saying sayonara to the London Stock Exchange.
On Monday, drug maker Invidior announced it will abandon its London listing and focus on the US after reviewing its structure and considering liquidity issues and the costs associated with a UK listing.
To be fair, this is a heavily US focused business – 80 per cent of its revenue is generated by its US business – and its reached a point where severing ties with the London market and focusing on the Nasdaq makes sense – but whatever its own reasons it joined a long and growing list of businesses turning their back on the UK market.
A staggering 88 firms left the UK’s stock market last year including Darktrace, Paddy Power owner Flutter, Just Eat, Ashtead, Arm Holdings and Tui. The total number of departures had a combined market capitalisation of around £200bn. Gone. Meanwhile, just 18 new listings took place.
Every business left for their own reasons – some were taken private, some shifted to other capital markets – very often New York – and some gave up their London listing while retaining a market presence elsewhere, but collectively these departures speak to major issues with the overall health of UK equity markets and – by direct extension – the health of the UK economy and the attractiveness of our business environment.
The burden of listing in London
Firms abandoning the London market point to the administrative burden, complexity and costs associated with a UK listing while, very often, highlighting the deeper pool of investors, simpler rules and improved liquidity on other exchanges.
The simple fact is that the London market is dominated by what people call the old economy – mining companies, oil and gas firms – and the fast growing tech and fintech giants of the future are simply not drawn to the London market in their quest for growth capital.
Just this morning, one of the UK’s fintech darlings – money transfer firm Wise – said it would shift its primary listing out of London and into the US – saying the move would “provide a potential pathway to inclusion in major US indices, further enhancing liquidity and demand for Wise shares” – adding that a primary US listing, as opposed to a London one, would “significantly enhance [its] profile” and “closely align with major growth opportunities”.
Here in London, it’s hard not to take that as a slap in the face.
Firms are saying, ‘we want to grow, and we can’t do it here’
The trend has been clear for some time.
The FTSE100 market capitalisation – the total value of listed businesses – has been falling. London’s share of global equity trading has been falling. Daily trading volumes have fallen. Pension fund allocation in domestic equities has fallen off a cliff. The number of analysts researching and covering UK stocks has declined.
There are particular reasons for all of these issues, and we don’t have time to get into them today, but they combine to paint a picture of a market in decline.
Things got so bad that for a while, advocates of UK equity markets including plenty of people here in the City and certainly in government thought the saviour of the London market would be a pile ‘em high and sell ‘em cheap fast fashion giant – in the form of Shein – indeed so keen were UK authorities to get this listing that we nodded them through the early regulatory stages despite widespread concern over the company’s human rights record.
Anyway, they’re not coming to London anymore.
So, who else can we pin our hopes on?
Revolut? Unlikely. CEO Nik Storonsky said going public in the UK was “not rational” when compared to the liquidity and lower trading costs of the US markets. Monzo? They’re talking down the prospect of an IPO right now. Zilch? Perhaps.
A story of decline
Any of those would put a spring in London’s step, but until an IPO like that actually materialises – and unless any such move heralded a genuine reawakening of the London market – the story remains one of decline.
There are plenty of taskforces, summits, reports, reviews and reforms aimed at tackling this problem – there’s no silver bullet but we need more retail investing, we need to scrap the tax on share trading, we need pension funds to rediscover an appetite for UK equities and we need a culture that nurtures and celebrates growth, risk and investment.
We need to appreciate that despite London and the UK’s many assets, competition is fierce and we’re in danger of falling out of the race.
In capital markets, money talks – and right now, its message to London is loud and clear.