This past week, the UK Financial Conduct Authority (FCA) posted updated rules designed to encourage more public share listings in the UK. The “overhaul” of the rules are part of a broader push to ensure and grow the UK’s status of a leading global financial services sector.
In the announcement, the FCA noted that the new rules allow for “greater risk” while acknowledging they must remain competitive on a global basis. At the same time, the regulator acknowledged there is a greater appetite for risk and a need to fuel more growth.
The changes seek to remove friction to a listing. Shares listed in the UK have declined by around 40% since 2008. The document explains:
“Having listened to all sides in this important debate, we do not believe the status quo is an option. The need for change is clear and widely acknowledged. The risk otherwise is that our regime falls increasingly out of step with those of other jurisdictions, making it less likely that companies eager to grow choose the UK as a place to list their shares.”
As part of the change, they will remove the premium and standard listing segments and combine them into a commercial companies category to simplify the listing process. Listed firms will no longer require shareholder votes on significant transactions.
The new Chancellor of the Exchequer, Rachel Reeves, said the financial services sector is vital to the UK economy and part of Labour’s growth mission.
“These new rules represent a significant first step towards reinvigorating our capital markets, bringing the UK in line with international counterparts and ensuring we attract the most innovative companies to list here.”
Sarah Pritchard, Executive Director, Markets and International at the FCA, said for a robust capital market, it is important to enable investment in growing companies, plus they must provide choices to investors.
“That’s why we are acting to make it more straightforward for those seeking to list in the UK, while retaining vital protections so investors can help steer the businesses they co-own,” said Pritchard. “Regulation is only part of the answer in helping the UK achieve sustainable growth. Other factors also play a significant role in influencing where a company decides to list. We’re committed to continually working together with all those who have a part to play in supporting a thriving UK capital market and thank everyone who has contributed to this work so far.”
The CEO of Neo, Laurent Descout, welcomed the update.
“The London listings shake up is certainly a move in the right direction and it should help to reduce the gap with markets like Nasdaq. They will make the listing process a bit easier and provide exit possibilities to a larger number of early-stage investors who struggled to sell their investments under past rules. From the perspective of a European fintech, we have always seen London as an attractive place to list and do business. The city’s capital markets are deep and liquid, there are a lot of investors and the talent pool is highly skilled so it ticks a lot of boxes. These changes will help ensure it remains the leading option for European firms looking to go public and raise cash.”
Descout said the LSE should keep an eye on Amsterdam as Euronext has been very active in attracting new firms. They can’t rest on their laurels, said Descout
Nikos Tzabouras, Senior Financial Editorial Writer at Tradu, said the drop in listings and losing UK-based Arm to New York, the LSE must do better.
“The FCA measures will help towards that goal and China’s Shein could become one the LSE’s biggest IPOs, if the rumoured listing materializes. At the same time, the government change can provide another tailwind. After ten years of political volatility, the UK has the chance to become once again a beacon of stability, just as uncertainty rises in France, Germany the US and elsewhere.”
While the new rules come into effect on July 29th, some believe they have not gone far enough to encourage public firms to trade in the UK. The FCA will review the impact of the update in the coming years.