LONDON — The departure of more than 200 companies from the London Stock Exchange (LSE) since 2016 has triggered warnings from industry leaders about a “pivotal moment” for the UK’s financial services sector, underscoring the urgent need for policy reforms to retain and attract public listings. The Confederation of British Industry (CBI) has said a mix of lighter regulation abroad, private acquisitions, and investor reluctance to back UK shares threaten the capital’s status as a global financial hub.
In a statement on Tuesday, CBI chair Rupert Soames called for a comprehensive strategy involving reduced listing regulation, improved marketing, and revamped investor incentives including tax reforms aimed at encouraging equity investment over cash savings. His comments come amid growing concern over the shifting landscape of equity markets and the impact on the UK economy.
Steady Outflow of Public Listings Raises Alarm
Since 2016, some 213 firms have delisted from the London Stock Exchange, with many moving their primary listings abroad or taken private by acquisition. In the last year alone, 88 companies left UK public markets, with a further 70 departures recorded in the first half of this year, turning a slow drip into a deluge.
Among the high-profile relocations is ARM Holdings, the British semiconductor company now listed in New York, and mining giant BHP, which shifted its listing to Australia. Food delivery platforms Just Eat and Deliveroo have also moved overseas or been taken over, while Paddy Power owner Flutter is increasingly focused on U.S. markets. Uncertainty remains about the future listings of blue-chip companies such as Shell and AstraZeneca.
“Houston, we have a problem,” said Mr. Soames, summarising widespread industry anxiety. “These exits matter because the stock market underpins a financial services sector that contributes 10% of all UK tax revenue funding vital public services like hospitals and schools.”
Despite these concerns, London’s financial infrastructure remains resilient. London raised three times more equity capital last year than the next three largest European exchanges combined, according to official figures.
Causes Behind the Exodus: Regulation, Market Dynamics, and Investor Behavior
Analysts point to a confluence of factors behind the trend. Regulatory environments in the U.S. and other financial centres are seen as more flexible or investor-friendly, giving those markets an edge in attracting listings. At the same time, private equity firms have played a growing role by acquiring public companies, often paying premiums but taking businesses off the public market.
Investor preferences are also shifting. The CBI report highlights a significant portion of UK household savings approximately £300 billion in cash ISAs are parked in low-yield, tax-free cash accounts rather than being invested in stocks or equity funds. This cautious approach limits capital flow to UK companies and dampens market vibrancy.
“There is a fundamental problem when the most popular investment vehicle is effectively the ‘worst possible one’ for economic growth,” Mr. Soames remarked. He suggested revising tax breaks for cash ISAs to incentivise investment in shares and productive assets. “Safe from what? Inflation – I don’t think so,” he added, referring to the erosion of cash savings’ real value.
Government’s Proposed Reforms: Tax Incentives and Supportive Measures
Chancellor Jeremy Hunt is understood to be considering changes to the ISA framework, aiming to reduce tax advantages for cash ISAs and encourage savers to move funds into stocks and shares ISAs. This move is expected to be outlined in the Chancellor’s upcoming Mansion House speech.
Labour’s shadow chancellor Rachel Reeves is also reported to be advocating for reforms to help individuals participate more actively in economic growth by investing in public equity markets. Her proposals reportedly include improving investor education and consolidating public sector pension funds to create “superfunds” aimed at boosting UK private market investments.
A Treasury spokesperson told the BBC, “The Chancellor will next week set out more detail on how the government intends to ruthlessly exploit our global advantages. This includes continued reform to ensure our capital markets are competitive and at the forefront of modern public markets.”
Balancing Executive Pay and Foreign Competition
The CBI’s Mr. Soames urged a pragmatic approach, highlighting that private firms, which often pay higher executive salaries and face less regulatory scrutiny, are increasingly attractive acquirers of UK public companies. This trend compels a reconsideration of the UK’s stance on executive remuneration if it wishes to retain and attract global business headquarters and listings.
“If you want to have international companies here, you must allow them to pay management what they need to be paid and not be squeamish,” Soames said, urging policymakers to adopt a mature position on executive compensation in a competitive global environment.
Broader Implications for the UK Economy
The outflow of public companies has multidimensional consequences. Public listings contribute not only to government revenues but also to market liquidity, investor confidence, and the broader entrepreneurial ecosystem factors integral to long-term economic growth.
UK investment institutions currently allocate only 4% of their assets to publicly traded British companies, underscoring a striking underinvestment that could perpetuate the problem. Increasing this figure requires structural reforms, enhanced investor incentives, and a more attractive listing environment.
Financial experts caution that failure to reverse these trends risks undermining London’s status as a global financial centre and could diminish the UK’s influence in shaping international capital markets.
Future Outlook
Reforms under consideration, including relaxed listing rules initiated by previous Conservative governments and the consolidation of pension funds, represent initial steps toward revitalising London’s equity markets. However, industry leaders stress these changes must be accompanied by deeper shifts in investor policy and cultural attitudes toward risk.
“Leading the investment horse to water is no longer enough,” Soames concluded. “We must find ways to make it drink from our own pool.”
As government and industry prepare for further announcements, the fate of the London Stock Exchange and by extension, the UK’s capital markets remains at a critical juncture.
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