With domestic capital shifting away from UK equities, new listings having slowed, private equity taking many companies out of the market, and high-growth firms often looking overseas to raise capital, the UK stands at a pivotal moment for the future of its public equity markets.
That’s according to the Confederation of British Industry (CBI), which has called on regulators to build on the significant reforms already underway and help ensure the global competitiveness of the London Stock Exchange.
“Public equity markets around the world are undergoing profound structural changes, driven by the rise of private capital, the growth of passive investing, and the dominance of US markets,” the group said.
“Despite this, the UK retains real strength and the LSE remains one of the world’s largest and most liquid markets, underpinned by deep pools of capital, global financial expertise, and a trusted legal framework.”
Timely, targeted reform can ensure the UK’s public markets once again underpin growth, innovation, and economic resilience.
Some of the reforms recommended by the business group include:
- Rationalise and simplify the burden of annual reporting, including the development of a framework for sustainability reporting which reduces duplicative international reporting requirements.
- Encourage companies listed elsewhere, particularly in Asia, to have secondary listings in London.
- Allow companies to compete for talent outside the UK market.
- Rethink the approach to Non-Executive Director remuneration.
- Consider increasing the Defined Contribution schemes’ exposure to UK assets.
- Remove or review the application of Stamp Duty and Stamp Duty Reserve Tax, specifically to reduce the extent it disproportionately penalises retail investors.
- Explore ways of encouraging companies to invest in growth rather than focusing on dividends and buybacks.
- Make the costs of initial public offerings tax-deductible.
- Make it easier for private-equity-owned businesses to exit through public markets.
“For the first time, listed companies have come together in a systematic way to the debate on how UK equity markets should be run,” said Rupert Soames OBE, CBI Chair.
Until now, the he voice of those who have the biggest stake in the success of the market – the companies that choose to be listed in London – has been barely heard, he said.
“The CBI aims to help redress that by bringing their perspectives into the conversation alongside government, investors and regulators.
“The LSE remains one of the largest equity markets in the world; following recent regulatory reform, it is becoming one of the most attractive to list.
“But it has seen a far greater loss of domestic liquidity than other markets as investors have allocated their assets away from UK equities into other markets and into bonds; it has also seen a higher level of attrition of membership caused by companies leaving public equity markets and going into private ownership. ”
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