London Stock Exchange: what might stop a wider exodus?

So much for prime ministerial lobbying, said Alex Brummer in the Daily Mail. SoftBank’s decision to float the £33bn Cambridgeshire-based chipmaker Arm in New York is “a body blow” to the London Stock Exchange (LSE), and to Britain’s tech ambitions.

It’s also “a snub” to Rishi Sunak and other ministers who have “spent a huge amount of time” wooing SoftBank’s billionaire boss, Masayoshi Son, into giving the City “a share of the action” via a dual listing. Bought controversially by the Japanese tech incubator in 2016, Arm is “the jewel of Britain’s high-tech sector”.

Yet, once again, we are failing to profit from this expertise. SoftBank cites “regulatory obstacles in the London market” as one reason for the move. There are concerns that “a flood of quoted firms based here could follow suit”.

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‘Exodus already under way’

An exodus is already under way, said Lex in the FT. The building materials group CRH “is the latest to pack its bags”, following last year’s flit by the plumbing business Ferguson. Bookmaker Flutter and data firm WANdisco are also eyeing stateside moves.

These decisions are hardly “a coup de grâce” for the City, but losing “a rare beast” like Arm is a major blow. The post-mortem on this affair will be “messy” for both UK regulators and the LSE. “The ebbing financial benefits of a listing in post-Brexit London are partly to blame.”

UK stocks trade at a discount; they’re denominated in sterling, a currency that has recently been weak and volatile; and the London market’s liquidity has been diminishing. There are plenty of ways of making the City more attractive, said Jill Treanor in The Sunday Times.

‘A trickle becomes a flood’

One startling statistic is that UK pension funds “have cut their allocations to equities by 90% in the past 20 years” – channelling the “staggering” £1.7trn invested in defined benefit schemes into safer assets such as bonds. If, say, local authority funds were consolidated, they could “take more risk and make bigger investments in shares”. Other options include creating a “future growth fund” to tempt fast-growing start-ups away from New York, and relaxing listing rules.

These are all good ideas, said Nils Pratley in The Guardian. But “the real frustration here” is the lack of a coherent strategy that will enable London “to fight back”. Previous rule tweaks merely produced a slew of flopped IPOs such as THG, Deliveroo and Made.com. “Endless consultations” are all very well, “but London needs to get on with it”.

It “is what it is”, said London Stock Exchange Group boss David Schwimmer, on news of another loss last week. This isn’t the moment to sound phlegmatic. “The London market needs a strategy before a trickle becomes a flood.”