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Once again, London’s struggling stock market faces challenges this quarter. On Thursday, UK fintech Wise announced a plan to move its main listing to New York to enhance its share liquidity. The day before, Cobalt Holdings, a metal investment firm, canceled its intended London listing and opted for private funding instead. London’s prospects of attracting Shein, a fast-fashion brand, seem uncertain as the company signaled last month its shift in focus toward Hong Kong. These recent setbacks follow the loss of 88 companies from the London Stock Exchange last year, marking the highest decline since the financial crisis.
Equity markets in developed nations are encountering difficulties. Doubts are dampening IPO actions globally. The lure of America’s large investor base and robust capital markets remains significant, despite challenges posed by Donald Trump’s actions. For a country like Britain, which needs growth and investment, revitalizing its public market is essential. The LSE has seen a stark decline, with primary listings falling over 40 percent since the global financial crisis. This ongoing loss feeds on itself: as new listings decrease, liquidity and investor interest diminish, perpetuating the cycle.
In recent years, UK policymakers have taken positive steps to address this issue. Jeremy Hunt, the former chancellor, introduced sensible reforms to simplify the listing process for foreign issuers. His successor, Rachel Reeves, is working to mobilize Britain’s extensive pension capital to counteract the trend of UK pension funds dramatically reducing their domestic equity holdings over the past decades. However, these reforms will require time to show results. If the government is genuinely committed to reversing the LSE’s decline, it must act decisively and promptly.
There are several actions it could take. First, it should reduce the 0.5 percent stamp duty reserve tax on purchasing shares in UK companies. This tax hinders liquidity and is higher than in competing nations. Reducing it would send a strong message to investors. In the long run, the £3 billion it contributes to the treasury each year could likely be regained through increased future revenues. Targeted tax incentives could mitigate the upfront costs of listing and promote equity investments, while adjustments to the tax-free individual savings account system could increase retail participation.
Second, the negative outlook surrounding the country needs to change. Investment thrives on positive stories, as indicated by the recent surge in Germany’s stock market. However, Britain struggles to promote itself effectively. The government’s upcoming industrial strategy presents an opportunity to highlight how the National Wealth Fund and British Business Bank can foster private investment in local companies, emphasizing the UK’s numerous advantages, from professional services to life sciences. Generating excitement about growth can help elevate equity prices. Recent analysis from the FT suggests that being listed in the US does not guarantee better valuations.
Third, long-term policy measures are vital. Enhancing financial education is crucial—the British are adept at saving but often less skilled at investing. Barclays Bank estimates that 13 million UK adults are holding £430 billion in “potential investments” in cash deposits. Additionally, financiers often cite the cumbersome regulations in the UK. Streamlining processes and promoting digitization will be beneficial.
Wise’s announcement is not an isolated case. A declining stock market reflects bleak growth forecasts and also exacerbates them. Britain has the opportunity and necessity to escape this cycle of despair.
