In order to stop the decline that has been happening in the country’s capital markets, the U.K.’s financial watchdog has changed the rules that govern its listed companies. This is the biggest change to the listing regime in more than 30 years.
Thursday, the Financial Conduct Authority laid out the new rules it will use to oversee companies listed on Britain’s stock markets, such as the London Stock Exchange. These rules will start to apply on July 29, 2018.
The change is meant to bring the U.K.’s listing rules in line with those of its international competitors. The goal is to help Britain’s troubled stock markets get back on track after a few high-profile companies have left and there haven’t been many initial public offerings (IPOs).
“These new rules are a big first step towards reviving our capital markets, bringing the UK in line with its international peers and making sure we attract the most innovative companies to list here,” Rachel Reeves, the new Chancellor of the Exchequer of the United Kingdom, said.
The changes will get rid of the rules that say shareholders have to approve plans for some big deals or deals involving related parties. The FCA said that the new rules will also give U.K.-listed companies more freedom when it comes to giving better voting rights.
Sarah Pritchard, executive director of markets and international for the FCA, said, “We are taking steps to make it easier for those who want to list in the U.K. while keeping important protections in place so investors can help run the businesses they co-own.”
In a statement, the FCA said that the new listing rules “involve allowing greater risk.” However, they also said that the “changes set out will better reflect the risk appetite the economy needs to achieve growth.”
Britain’s capital markets had dropped sharply, with 40% fewer U.K.-listed companies than at their peak in 2008. This was shown in a government review led by Jonathan Hill in March 2021. Hill had earlier called for the overhaul.
Between 2015 and 2020, five years, Britain was home to only 5% of all IPOs around the world, according to the review.
Recently, the London Stock Exchange LSEG, 1.50% has taken a lot of hits. As a result, many top companies have either taken their shares off of Britain’s main market or chosen to list in places other than London, such as New York.
The British government worked hard to get ARM Holdings ARM, +2.29% to list on the London Stock Exchange instead of the New York Stock Exchange in August 2023. This was despite the fact that the company’s owners, Softbank, wanted to list the Cambridge-based company in London instead.
In February of this year, 98.35% of Tui TUI1 shareholders, or 0.42%, voted in favour of plans to remove the travel company’s London listing. This change meant that most trading of the company’s shares would now happen in Germany, where it is based.
A lot of U.S. competitors and private equity firms have bought up British companies, which has made the problems in the U.K.’s capital markets worse by taking even more companies off the country’s stock exchanges.
It has been said that the U.K.’s stock markets are in a “doom loop” because there aren’t enough IPOs, which means there isn’t enough liquidity, which means companies aren’t interested in British public floats because of the low valuations.
