By Charlie Conchie
The UK’s equity market has been “taxed to death” and “completely throttled” by fiscal policies and regulation, the former chief of the London Stock Exchange Group has claimed, as he warned the Capital was in danger of losing its status as a global financial services hub.
Speaking with the Following the Rules Podcast, Xavier Rolet, who is credited with transforming the capital markets group during his tenure as chief between 2009 and 2017, said that a shallow pool of equity capital and restrictive rules meant the City risked losing more of its market share to the US.
“I believe that if the current trend continues in the UK and Europe, the US market will be even more irresistible because of the pool of capital, the capital solution, and the balance sheet efficiencies that they will offer in an environment which is fragmented,” he said.
“That is one area where I would suggest an urgent wholesale rethinking [is needed] of the regulatory framework and the fiscal framework – which today hobbles UK and European equity markets – to really free the power of equity markets to create that growth to help this really ambitious, talented entrepreneurial position.”
Rolet’s warnings point to the scale of the challenge facing ministers and regulators as they look to boost the appeal of London’s markets on the global stage.
The government has commissioned two reviews into the state of the UK’s capital markets that looked to ease the way that firms in the UK can float and raise cash. Reforms already rolled out include the introduction of a dual-class share structure to tempt more tech firms into floating in London, while stripping out the role of regulators and boosting participation from retail investors in the secondary capital markets are slated to be introduced.
However, London has been beset by firms shunning the bourse in favour of New York, as bosses look to fetch higher valuations and tap into a deeper and more mature investor base.
Rolet told Following the Rules today that “deep savvy liquid equity markets” would be essential to boosting productivity in the UK and turning more entrepreneurial firms in the UK into “£100bn companies”.
His warnings echo those of some of London’s top chairs in a new report, who claim that London does not offer the ability to tap into the same breadth of investors as other financial centres.
“The reality of the London market is that the active pool is not large enough,” an anonymous chair told PR firm Tulchan in the report.
“Passive investors are less interested in the risk return of a growth portfolio and they also tend to take a less engaged view of companies.”
The post London markets ‘completely throttled’ by regulation, says former exchange chief appeared first on CityAM.
