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Another quarter, another blow to London’s rather stock market. On Thursday, UK Fintech Wise said it plans to switch its main list to New York to improve stock liquidity. On Wednesday, metal investment company Cobalt Holdings decided to abolish the move to the London list and instead raise funds personally. The city’s hope of landing scenes appears to be on the volatile ground after showing that it focused on Hong Kong late last month. These fresh setbacks follow the loss of 88 companies on the London Stock Exchange last year.
The stock market in developed countries is struggling. Uncertainty is robbing IPO activities everywhere. Despite Donald Trump’s interference, the gravity gravitational forces of America’s vast investor hubs and deep capital markets remain forces to be considered. But for a country like the UK that is hunger for growth and investment, it is essential to bring back its public markets. LSE has experienced particularly severe declines. The main list of UK stock exchanges has fallen by more than 40% since the global financial crisis. Constant drainage is self-reinforced: listings dry out, liquidity and investor activity become thinner, and move on top.
In recent years, UK policymakers have made welcome efforts to halt the trend. Former Prime Minister Jeremy Hunt has launched wise reforms to simplify the listing regime and facilitate listings in London for foreign publishers. His successor, Rachel Reeves, is trying to consolidate and mobilize the vast and vast pension capital of the UK to dramatically eliminate the trends in the UK pension fund over the past decades. These reforms take time to pay off. Still, if the government is serious about correcting the decline of the LSE, it needs to act boldly and promptly.
There are many levers that you can pull. First, we need to cut the 0.5% stamp duty reserve tax on the purchase of stocks in UK companies. Taxes reduce liquidity and are already being collected at a higher rate than their fellow countries. It also sends clear signals to investors. Over time, £30, £30, annually, will likely be reclaimed by higher future revenues. Other targeted tax incentives can help you pay upfront costs for listings and encourage stock investments, but reforms to tax-free personal savings account systems could drive retail engagement.
Secondly, negative funk across the country needs to go. Investment has thrived in a bright story, as recent bumps in the German stock market show. However, the UK is not good at selling itself. The government’s future industrial strategy is an opportunity to outline how domestic asset funds and UK business banks can support private investment in domestic businesses, and highlight the many comparative benefits of the UK, from professional services to life sciences. Generating a buzz around growth can lead to a rise in stock prices. After all, listing in the US, as recent FT analysis has been found, does not guarantee a higher rating.
Third, long-term policy initiatives remain important. Improving financial education is important. The British are good at driving away money, but are far less skilled at investing it. Barclays Bank estimates that 13 million adults in the UK hold £430 billion of “possible investments” in cash deposits. Investors have also continued to complain about the UK’s burdensome deficit. Streamlining and digitization efforts will help.
Wise’s announcement will not be a one-off. The stock market shrinks reflect and is responsible for the dim growth outlook. Britain can break the loop of destiny.
