The regulatory and market environment for British firms looking for a public listing needed a serious upgrade, the Financial Conduct Authority‘s (FCA) Executive Director of Markets and International said.
Speaking at the Capital Markets Industry Taskforce Conference, Sarah Pritchard discussed several topics, with the changes to UK listing regulations coming into force back in July being a significant area of discussion.
Industry feedback collected by the FCA informed the regulator that the pre-existing listing rules had placed disproportionate burdens and restrictions on companies with growth ambitions.
“Some went so far as to say that listing in the UK was being lost as a consideration. The regime was just too complex with too many barriers,” Pritchard said.
“And in the low-interest rate environment, private equity markets were racing ahead. Maintaining the status quo wasn’t an option if we wanted to reverse long-term decline. But it wasn’t easy either.”
If listing in the UK truly was ‘lost as a consideration’ this would have a significant impact on the country’s payments industry but also for the country’s economy at large. An obvious reason for this is that IPO’s unlock a new source of income generation and funding for companies, including those in the fintech and payments space.
This funding often proves invaluable for companies to move forward with growth plans and ultimately make a wider contribution to the British financial services ecosystem and economy.
However, another problem lies in that many companies have been looking elsewhere for listings. The US in particular has become an attractive destination – Flutter Entertainment, a leading multinational gambling firm, is a notable big name to abandon the London Stock Exchange (LSE) for the New York Stock Exchange (NYSE).
UK authorities want to see this exodus stop. It will be of particular concern for HM Treasury, the UK government’s economic policy department, which wants to maintain growth after several years of economic difficulty.
The FCA has overhauled listing rules with the goal of better aligning the UK regime with international market standards. Ensuring investors have the right information available before making a decision was also an important objective. The rules have removed the need for votes on significant party transactions, though shareholder approval for the reverse takeovers or delisting is still required.
Pritchard continued: “The new rules introduce a simplified regime that maintains high standards, one that is right for the UK, compares well internationally and one which we hope will help boost UK stock markets.
“Companies listed in the UK will still be expected to uphold high standards regarding disclosure and corporate governance. And shareholders retain the ability to exercise good stewardship to influence company behaviour and hold the management of the companies they co-own to account.”
As mentioned above, the changes do not just apply to companies but investors as well. It is not just companies who have been leaving British shores for overseas stock exchanges, with some investors also preferring to eye up options on the US markets, or perhaps elsewhere in Europe or in Asia.
UK fintech is a thriving sector, and despite some ups and downs it remains a significant investment magnet in the British economy. Ensuring these firms keep their capital in the UK will ensure this economic contribution remains.
Take Revolut, for example. London-based fintech has enjoyed considerable growth over recent years to become Europe’s most valuable startup. It is also eyeing up an IPO according to reports – but whether it chooses the UK or not is a different matter.
As Pritchard put it, the FCA has observed that ‘companies raising capital and investors deploying it have global choices’. She concluded that: “We want them to choose the UK”.
“We want to support investors to make their own choices too about the companies they invest in, through timely and appropriate disclosures,” she added.
“And we want to show the regulatory dynamism, which some wags may say is a somewhat oxymoronic phrase, that one commentator credited us with recently. We’ve come a long way and as you know the journey isn’t over yet.”
