Too many headlines over the last year have proclaimed the untimely death of London as a capital raising venue.
A dearth of IPOs (hardly surprising given rising rates and economic uncertainty), a belief that listings in the US provide the silver bullet (WANDisco, here’s looking at you) and ongoing gripes over the constrained and cumbersome processes that are required to match buyers and sellers have all been out in force. In turn, that has been underwritten by a swathe of experts keen to hitch their proverbial waggon to the equally proverbial train and call time on everything that has made London a centre of financial excellence for centuries.
But with early June seeing news of three new listings in London and the raw empirical evidence underlining the fact that over a variety of time horizons, the FTSE-100 on a total returns basis doesn’t appear to grossly outperform or underperform its peers in Frankfurt or New York, it seems clear that we need to take a closer look at this.
London has always been a hotbed of financial innovation and that remains true to this day. Challengers are keen to work within the understandably tight technical constraints to deliver game-changing propositions that aren’t all smoke and mirrors. Whilst some slip through the net – London & Capital Finance is a prime example – the scope and scale of failures in the UK over the last decade is nothing close to what we have seen with the likes of Wirecard (Germany) or the latest swathe of regional banking collapses in the US.
But if innovators hold the keys, why have we seen a UK Capital Markets Industry Taskforce established, endorsed by the government and populated by delegates from some of the most staid institutions in the Square Mile? Chaired by the LSE and with luminaries including Mark Austin of Freshfields (author of the Austen report) plus representatives from Schroders, Barclays and GSK, this self-appointed committee has positioned itself to be the authority when it comes to righting the ship – a ship that may or may not be sinking, depending who you ask.
The potential conflicts of interest here are many. The LSEG holds the keys when it comes to the allocation of new MTF (Multilateral Trading Facility) licenses.
The same body is also on a relentless power grab, with the main board, AIM and now their nascent Intermittent Trading Venue project looking to mop up as much of the London capital market as possible. Yet as we have seen explicitly with AIM, the lack of meaningful competition – Aquis may be making inroads, but it has taken a long time - has simply served to drive listing costs higher and accelerate the number of issuers deciding that remaining part of a public market simply isn’t worth the grief.
For London to regain lost ground, innovation needs to flourish, not be stifled by those whose agendas are dominated by self-interest. The fact this self-elected Taskforce felt they could make a difference without any challenger FinTech’s in the pack defies belief. There’s a feint nod to innovation with the inclusion of a single private company on the panel, but it feels like tokenism – and the reality that the Government endorsed all this seemingly under a “nanny knows best” mantra is just as bad.
Top this with too many “experts” from all sides who right now seem intent on calling the death of capital markets in the UK and it’s no surprise it feels like we’re peering into the abyss. City Grandees will always have a role to play, but equally they need to understand when it’s time to step aside and make way for the new guard. Ultimately this is the cohort who will define what the square mile looks like in the years to come.
Have a tip for the secret banker? Email citydesk@standard.co.uk
