The financial regulator has set out reforms to encourage companies to list their shares in the UK after a series of high-profile businesses decided to list abroad instead.
New rules from the Financial Conduct Authority (FCA) should make it easier and simpler to encourage a greater range of companies to list in the UK and compete on the global stage.
Among the changes are proposals to protect investors by switching to a financial information disclosure-based system, which the regulator believes puts sufficient information in the hands of investors to “decide how they want to invest”.
Currently disclosures ae dictated by specific rules and the move would see more of the risk from an initital public offering (IPO) to investors.
It confirmed it plans to merge the “premium” listing on the London Stock Exchange, which has more stringent rules with a less onerous standard “commercial” company listing.
The FCA admits that the changes “could entail an increased possibility of [company] failures, but the changes set out would better reflect the risk appetite the economy needs to achieve growth”.
The number of companies listing in the UK has fallen by about 40 per cent from a peak in 2008. Between 2015 and 2020, the UK accounted for only 5 per cent of new companies coming to market (IPOs) globally.
The UK’s reputation as an international finance centre has been hit by a series of major companies deciding to go public somewhere else such as New York or dropping their existing London listing.
It suffered a heavy blow when the Cambridge-headquartered ARM plc, described as a “jewel of the UK technology industry” as it designs technology found widely in electrical equipment around the world, opted to list in New York, despite being wooed by both the Prime Minister Rishi Sunak and former PM Boris Johnson.
Tui, Europe’s largest tour operator said earlier this month it was considering switching to Frankfurt while Irish-based packaging group Smurfit Kappa and building materials group CRH switched to New York. Gambling company Flutter is also preparing a US listing.
Financial regulators face growing pressure from the Government to encourage and foster economic growth. Critics fear that pressure on the regulators could lead to investors paying a price.
Bim Afolami, a Treasury minister said: “The UK is Europe’s leading hub for investment but it’s a competitive world and we are by no means complacent. We want to make the UK the global capital for capital attracting the brightest and best companies in the world.”
“We are strengthening the UK as a listing destination, taking forward reforms to make it quicker to list, improve disclosure and make our capital markets more efficient and open.”
UK Finance, a banking industry body, said the changes would strike the right balance between managing risk and encouraging growth that will help significantly in attracting more listings.