Three ways to restore confidence in UK public markets
To reignite confidence in our public markets, we need domestic reforms that increase liquidity, foster investor confidence, and provide more avenues for capital flow, says Alastair King
As Lord Mayor I have the privilege of traveling the world promoting London as a global financial powerhouse. Liberalised trade opens doors for stronger partnerships, smoother business, and gives the UK a competitive edge on the global stage. The resumption of UK-India free trade talks marks a significant step forward. In 2024, UK-India trade was worth £42bn and supported over 600,000 jobs. This is just the beginning – there is so much more to unlock.
There is another key area of economic policy that requires our urgent attention: the state of the UK’s public markets. London remains home to the second largest equity capital market in any free-market economy. Despite the encouraging fact that two-thirds of UK CEOs believe the value of a London listing has increased, we face a tougher market reality.
In 2024, 88 companies delisted from the London Stock Exchange, with just 18 newcomers replacing them. While this decline is notable, it is not unique to the UK. In the US, Jamie Dimon of JP Morgan Chase noted that the number of public companies has dropped by 41 per cent since 1996 – a greater percentage decline than that experienced in the UK.
However, it is not all doom and gloom. Last December, Canal+ successfully listed in London, marking the largest new listing in two years, and just last month I attended a market opening for the London listing of a major Saudi real estate company’s international sukuk programme, a sign of confidence from a rapidly growing economy that points to the enduring appeal of London as a global financial hub.
To reignite confidence in our public markets, we need domestic reforms that increase liquidity, foster investor confidence, and provide more avenues for capital flow.
As Lord Mayor, my theme of ‘growth unleashed’ advocates for pragmatic reforms in this regard. One of the most straightforward measures could involve rethinking how we incentivise UK savers.
Unleash ISAs
Over £700bn has been invested in ISAs over the past decade, but much of it has been parked in cash ISAs, which offer lower returns than stocks and shares ISAs. It is time to look at that model once again – not mandating anything, but offering better advice and incentives and saying that if you want the full tax break, you need to be investing in UK publicly quoted equities.
Redirecting a significantly higher proportion of savings into UK public equities would have a significant and rapid impact on the mood in our public markets.
Pension funds must back IPO firms
Secondly, significant work has taken place over the past two years to support the UK pensions industry to invest into pre-IPO and IPO firms. But we need to go further and faster, which is why we will be building on the Mansion House Compact signed by our largest DC pension funds in 2023 under the mayoralty of my predecessor Sir Nicholas Lyons, and urging them forward in fulfilling the 2030 target to invest five per cent of funds into unlisted equities.
I am also hosting a series of scale-up capital events with the Worshipful Company of Information Technologists. These bring the best British technology businesses seeking to raise £5-30m together with British investors. If a company has British investors in size on its shareholder list, it is more likely to list in London.
Stamp duty on shares puts UK companies at a disadvantage
Thirdly, stamp duty on shares puts UK markets and companies at a disadvantage compared to other countries. The UK currently taxes its retail investors with Stamp Duty Reserve Tax when buying a UK-listed Aston Martin share, but not when buying a German-listed Porsche share. Or, to take a recent example, when British equipment hire firm Ashtead moves from the London Stock Exchange to New York it will cost less for UK investors to invest in it. This is unfair and it needs to change.
To rebuild confidence in our public markets, we must be bold and act decisively. The risks of doing nothing are far greater than the risks of reform.
Alastair King is Lord Mayor of Canada