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Several big companies are looking at potential London share listings, including miner Anglo American Platinum Ltd., Hong Kong conglomerate CK Infrastructure Holdings Ltd. and Chinese fast-fashion giant Shein. The flurry of interest suggests the UK stock market\u2019s fortunes may be improving after many years of depressed activity. An effort by the new Labour government to channel more British pension fund money into local stocks may help. But the market is still much smaller than it was before the 2008 global financial crisis, and a recent pullback by investors from European equities has hit London harder than other European markets.\u00a0<\/p>\n
London\u2019s reputation as a listing destination for international companies has suffered as several firms \u2014 including CRH Plc and\u00a0Flutter Entertainment Plc<\/a>\u00a0\u2014 chose to switch their main share listings to New York. Even London\u2019s biggest inter-dealer broker, TP ICAP Group Plc, is looking to the US as it\u00a0considers<\/a>\u00a0an IPO of a lucrative data business. An especially bitter blow was London\u2019s failure to lure one of the most promising British technology companies \u2014 Cambridge, England-based chip designer Arm Holdings Plc. Despite\u00a0lobbying\u00a0<\/a>by government ministers and an offer to relax UK listing rules, Arm\u2019s Japanese parent company SoftBank Group Corp. chose New York for its return to public markets.\u00a0<\/p>\n Activity has shrunk dramatically from a peak before the financial crisis, with average daily traded volume on the FTSE All-Share Index falling to about \u00a33.6 billion ($4.6 billion) in July from almost \u00a314 billion in the same month of 2007. Investors tend to pay less for illiquid stocks as they risk a bigger loss when they come to sell. The MSCI UK share index was trading at a 42% discount to its US counterpart as of early August, based on forward price-to-earnings ratios. To be sure, the decline in trading activity has been Europe-wide and the London Stock Exchange remains Europe\u2019s busiest in terms of the amount of money changing hands each day.\u00a0<\/p>\n New York\u2019s deeper pool of investors has prompted a number of companies to seek listings across the Atlantic. At the same time, fewer firms are attempting IPOs in London. While that reflects a broader slowdown in the global IPO market, investors were also deterred by the poor performance of some high-profile listings in 2021, including Deliveroo Plc and Dr Martens Plc. Among the London-listed companies that have been looking overseas:\u00a0<\/p>\n The total capitalization of London-listed equities fell from a high of $4.3 trillion in 2007 to about $3.2 trillion in June 2024, according to data compiled by Bloomberg. Over the same period, the value of US stocks almost trebled to $57 trillion.\u00a0<\/strong>London is only the sixth-biggest globally now, trailing the US, China, Japan, India and Hong Kong and similar in size to Paris, a powerful reality check for an institution whose history stretches back more than 200 years.\u00a0<\/strong>The decline began well before Brexit and the coronavirus pandemic, as a deeper productivity crisis pushed Britain\u2019s economic performance into the slow lane in relation to other Group of Seven developed nations.\u00a0<\/p>\n In the early 2000s, the UK government introduced rules forcing retirement fund managers to be more open about their investments and how they planned to meet future pension obligations. One result was a shift out of riskier equities \u2014 the pension industry\u2019s preferred investment until that point \u2014 and into safer government bonds. The trend was reinforced over the following decade as millions of workers holding so-called defined-benefit pension plans retired. Pension managers doubled down on government debt at the expense of shares so they could better match their long-term liabilities to those retirees. What\u2019s more, what little equity allocation the funds retained was put increasingly into stocks in other markets as they diversified their holdings.\u00a0UK pension funds held just 1.6% of UK-listed stocks in 2022<\/a>, down from about 32% in 1992, according to data from the Office for National Statistics.<\/p>\n Due to Brexit, some private trading forums, known as dark pools, and secondary-listing exchanges moved business to Amsterdam from London. Amsterdam has also become more competitive versus London and New York since Brexit. Still, London took a 25% share of the European IPO market in 2021 \u2014 the largest of any city \u2014 before a global downturn struck in 2022.\u00a0<\/p>\n UK regulators in July announced an\u00a0overhaul<\/a>\u00a0of their rules for companies looking to make their public debut in London. The new regulations allow companies to carry out more activities without putting them to a shareholder vote, according to the Financial Conduct Authority. They also make it easier for companies to have two classes of shares, a structure that\u2019s often favored by entrepreneurs or early-stage investors who want to have a significant role in businesses even after they have gone public. Deutsche Bank said the changes would increase the risks from buying stocks and lead to more of a \u201cbuyer beware\u201d culture in equity investing in the UK.\u00a0<\/p>\n Prime Minister Keir Starmer\u2019s Labour Party, which won power in July, pledged in its\u00a0manifesto<\/a>\u00a0to \u201cact to increase investment from pension funds in UK markets.\u201d It outlined plans to promote private investment through a \u00a37.3 billion ($9.4 billion) national wealth fund and said it would \u201cconsider what further steps are needed to improve pension outcomes and increase investment in UK markets.\u201d Chancellor of the Exchequer Rachel Reeves has said she wants British pension funds to learn from the Canadian model, where larger pension plans mean they can invest far more in productive infrastructure assets than those in the UK. That may affect how funds allocate resources.\u00a0<\/p>\n<\/div>\nHow bad is the London stock market downturn?<\/h2>\n
Have other firms left London?<\/h2>\n
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Where does the London stock market rank now?<\/h2>\n
What else is to blame? \u00a0<\/h2>\n
Is Brexit a factor?\u00a0<\/h2>\n
What\u2019s the UK doing about it?<\/h2>\n
What are the government\u2019s plans?\u00a0<\/h2>\n
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