In April 2024 the boardrooms in the City of London and some from industry and commerce were buzzing with excitement at the prospect of Labour taking over from a rudderless Conservative administration.
In the previous four years, the Tory government never recovered from the damage inflicted by Covid, coupled with indolent leadership from three Prime Ministers in double quick time. This was Labour’s time. The mood was upbeat. ‘Fear initially knocked at the door, faith answered; no one was there.”
The smoked salmon bagel breakfasts hosted for combinations from Messrs Starmer, Reeves, Reynolds and Siddiq were very encouraging.
The PM in waiting and his colleagues had charmingly reassured their board table hosts that Labour was the party for business and growth. Business had nothing to worry about. Labour was very much ‘on-side’ and knew unequivocally that to achieve growth, incentives to invest must be encouraged. All Labour’s ducks seemed to be set up cleverly in a row.
It took only six months for the reassured to start having considerable doubts, such was the damage inflicted on business by an increase on employers’ share of National Insurance Contributions. There were also very little in the way of incentives to encourage inward investment, despite the formation of the National Wealth Fund and the British Business Bank to support Labour’s ambitious plans for massive infrastructure projects. Confidence in the new government started to fall like a stone.
Global investors seemed very reluctant to support some of our aspiring SMES, especially the fin-tech operations. Many market activists have blamed Brexit, which had only been delivered in name only.
What was so frustrating was the ineptness of the Conservatives, which failed to deliver a gold-plated certainty – the increased prosperity of the ‘City’ – the quintessential cash cow. The financial sector in the UK was already delivering £75 billion of revenue per annum to the HM Treasury’s coffers and there could have been so much more to come.
The previous Government failed to capitalise on the value of the City. Brexit should have been a ‘slam-dunk’ for the City. Sadly, no exciting tax incentives for companies to set up in the UK were put into place. Regulation was far too onerous and cumbersome.
Also, if the UK aspired to be the world’s leading financial centre, charging stamp duty on trading shares was unrealistic financial nonsense. Also spiteful legislation towards ‘non-doms’ just exacerbates the negative perception of the UK’s ability to create growth.
The ‘80’s were the halcyon years for the City, triggered by the abolition of exchange controls in 1979, followed up in 1986 by ‘Big Bang’, which saw international investment banks such as Goldman Sachs, JP Morgan, Deutsche Bank and UBS rub shoulders and then usurp many of the grand old merchant banks of the day such as SG Warburg, Morgan Grenfell, Schroders, Samuel Montagu and Barclays Capital. The introduction of the LIFFE futures market in 1984 and the explosion of derivative trading triggered the expansion of capital markets and a tsunami of IPOS and privatisations.
London still remains a major financial hub. However, there is some alarming unappetising data to reckon with. In 2007, the UK had 252 Initial Public Offerings (IPOs) on the London Stock Exchange.
This represented a decrease from the 367 IPOs the previous year, with overseas IPOs attracted 86 companies from 22 countries. Last year was a poor year for IPOS, mainly due to a dip in confidence and geopolitical issues – just 17 in total here in London and 18 so far this year. There have been 58 IPOS in New York since January 2025.
What is very worrying is that in the last year 88 companies have delisted in London. The delisting started with ARM, which left London supposedly valued at $32 billion, is now valued at $138 billion! Flutter and DarkTrace - fallen to US private equity- plus many others have followed.
It is generally acknowledged that US fund managers have access to many more investors and consequently greater liquidity has contributed to a 25% valuation premium there. A lack of confidence and enthusiasm in the UK economy have encouraged moves to New York. Recently, Revolut served notice to establish a new Western Europe HQ in Paris and earlier last week ‘Wise’ said it will be delisting in London and heading for New York.
It is alarming to note that only 4% of the LSE’S annual income is derived from stock exchange business. The rest comes from technology (Refinitiv). The LSE needs to raise its game, as does AIM. Aquis Exchange have hosted 4 IPOS so far this year and the outlook, under fresh ownership of ‘Six’ looks encouraging.
Monzo, Starling Bank, Virgin Atlantic, ASDA and Boots are in the mix of companies that may seek public quotations this year, but much depends on market conditions. Hong Kong’s Shein’s IPO remains in doubt.
If the Government believes in growth, then its emissaries, Business Secretary Jonathan Reynolds, Economc Secretary Emma Reynolds and investment minister Baroness Poppy Gustafsson need to wake up and smell the coffee? Business’s risk appetite is at a low ebb. Confidence and sentiment are stagnant. Investors are vital. They must be encouraged with incentives!
