Listing rules in the UK have been under scrutiny for some time, particularly following our departure from the European Union, with many critics arguing that the current listing regime is too complex.
Just recently, British technology firm Arm chose to list in the US rather than the UK, which led to many expressing concerns over whether UK stock markets remain an attractive proposition to businesses post Brexit.
We’ve also seen open criticism of the UK’s business regime from Microsoft, with the company’s President Brad Smith telling the BBC that the EU is a better place than the UK to start a business.
And according to the UK Listing Review, listings in the UK have fallen by 40 per cent since 2008.
That’s why the Financial Conduct Authority (FCA) has unveiled new plans to “reform and streamline” the UK’s listing rules.
Among the proposed changes include replacing its existing “standard” and “premium” listing segments with a single category for equity shares in commercial companies.
The FCA hopes that these reforms will help the country attract a wider range of companies, incentivise competition and – crucially – offer more choice to investors. The watchdog also wants to make the rules easier for companies to understand and more effective.
Arm’s decision not to pursue a London stock exchange listing this year was seen as a blow to the UK, even though the firm didn’t rule out considering a UK listing in the future.
But Arm Founder Hermann Hausser’s comments following the decision were especially devastating, and may well have made regulators and policymakers sit up and take notice.
Speaking to BBC Radio 4’s Today programme, he said: “The fact is that New York of course is a much deeper market than London, partially because of the Brexit idiocy, the image of London has suffered a lot in the international community.”
For Arm, one of the most globally successful British technology firms, to say this will be a concern to the government as it seeks to make the UK an attractive market for international investors.
It’s therefore no surprise then that ministers have enthusiastically backed the FCA’s proposals.
Economic Secretary to the Treasury Andrew Griffith described them as an “important step forward” in enhancing the UK’s economic competitiveness.
“We are the largest financial centre outside the US, but we recognise that companies and investors have a choice,” he said.
“It is important our rule book keeps pace with practices elsewhere, whilst still benefiting from the high-quality reputation of our markets.”
But while the FCA and the government are positive, the announcement has been met with a mixed reaction elsewhere.
For example, Richard Wilson, chief executive of trading platform Interactive Investor, has stated that while he backs the principles behind listing rule reform to make the UK more competitive, the proposed changes risk “undermining market standards”.
“Dual-class structures, which come with differential voting rights, erode shareholder rights,” he commented. “Distorted rights distort governance and accountability.”
Jonathan Paltrowitz of OTC Markets Group, meanwhile, has warned that there should be “caution around any adverse impact on traditional UK investors from watering regulation down too much”.
“There is a risk that the FCA’s proposed reforms to UK listing rules are swinging the pendulum too far in the other direction,” he said.
The FCA believes its proposed reforms will “significantly rebalance the burden of regulation” and therefore benefit listed companies and investors who are “willing to set their own risk appetite and terms of engagement”.
It will be interesting to see what impact these new rules will have, and whether the warnings of concerned stakeholders come to pass.
Needless to say, we’ll be keeping a close eye on what happens with listing rules and the impact that any changes may have.