For sure, Brexit has raised existential questions about the UK economy.
After a tumultuous year in which it lost the top spot among Europe’s stock markets, London is now grappling with a slate of companies — including Arm Ltd, the jewel of Britain’s technology industry — ditching local listings in favour of the US.
Arm designs key parts of the chips that power almost every smartphone on the planet. Its strategic importance is so great that when owner SoftBank Group decided in 2020 to sell the company to US chipmaker Nvidia Corp, it sparked an outcry from Arm’s customers that eventually killed the $40bn deal.
London’s public companies are now looking to New York as a preferable market for listing their shares, with City dealmakers handling frequent inquiries from clients asking how they could shift across the Atlantic.
Even some members of the benchmark FTSE 100 index are said to be thinking about transferring their listings to New York.
Indeed, the London market is facing threats from multiple directions.
UK-listed companies are increasingly targeted by US buyout funds and other investors seeking to take advantage of a weaker pound and depressed valuations.
As companies decide to stay private for longer and IPOs remain far and few between, the loss of established listed companies is an added blow.
In 2021, Shell’s executives explored moving the company’s stock market listing and headquarters to the US from the UK, the Financial Times reported last week and the move that would have sent shock-waves through corporate Britain.
A string of moves have been announced in recent months.
Ascential, the London-listed data-and-analytics company, said in January it was planning a separation and listing of its digital commerce assets in the US, as part of a strategic review.
The size of the UK stock market has been shrinking over the past 16 years. The total market capitalisation of London-listed equities fell from a peak of $4.3tn in 2007 to about $3tn this year.
The UK lost its crown of Europe’s largest stock market to France last year, another blow to the dominance of British finance. As a comparison, the US stock market more than doubled in size over the same period, growing its total market capitalisation from $19tn to $43tn, according to data compiled by Bloomberg.
Citigroup is building a new trading floor in Paris as the Wall Street giant prepares to nearly double its staff in the French city.
The trend is ominous for flagging initial public offerings in the UK. It also sets back efforts to transform what is widely perceived to be a dinosaur equity market that’s overly reliant on old economy sectors such as oil and banks.
Coming at a time of stalling economic growth, it could mean more money leaving domestic equity funds after record outflows of $26.3bn last year.
The reward for braving a London IPO has also been poor in recent years.
Food-delivery platform Deliveroo has sunk nearly 80% since going public in 2021, while Dr Martens, the footwear brand, is down about 58%.
In 2022, the UK capital’s share of European IPO proceeds fell to a mere 8% of the region’s total, the lowest since the global financial crisis.
Sharp swings in the currency have also acted as a deterrent for investors even as stock valuations remained cheaper than European and US peers.
Sterling has been among the more volatile developed market currencies since 2016, data compiled by Bloomberg show.
After Arm’s decision, David Schwimmer, the London Stock Exchange CEO, called for reforms to listing rules “to make London that much more of a competitive and attractive listing destination and financial centre.”