What the London Stock Exchange exodus could mean for Britain

Last year saw the biggest outflow of companies from the London Stock Exchange since the global financial crisis.

According to accountants EY, 88 companies including Paddy Power owner Flutter, travel group Tui and Just Eat abandoned the London market for US and European exchanges.

It comes amid fears of the capital’s shrinking relevance as a place to do business following Britain’s exit from the European Union.

Last month, former London Stock Exchange boss Xavier Rolet said there is a “real threat” that more UK companies will move their listings to America as trading thins out in London and grows over there.

The loss of 88 firms is the most since 2009, said EY. During the same period there were 18 new listings. where companies first sell shares to the public.

The shrinkage of London as a global market has been steady. Twenty years ago, when banks, manufacturers, oil companies and pharmaceutical firms dominated lists of biggest companies, UK-listed stocks accounted for 11 per cent of the global market. Now it is about 4 per cent.

The trend is as much about America’s growth as it is about London’s shrinkage as the US and its giant tech stocks have dominated world markets.

The entire FTSE 100 index of top UK-listed companies including household names Tesco, HSBC, Shell and British Airways owner IAG are together worth about £2 trillion.

By comparison, New York-listed Apple alone has grown to be worth $3.72 trillion (£2.97 trillion).

The next-biggest companies in New York which help the US market swamp all competition are all tech firms worth more than $1 trillion, including Amazon, Tesla, Microsoft, Meta, Google owner Alphabet, and Nvidia.

No London-listed company is worth more than £165bn, or a few per cent of Apple’s size.

Largely this shows that to compete, a stock exchange needs big tech companies. Britain grows a few, but the biggest example, chip designer ARM, chose New York to have its shares listed in 2023 when its owner SoftBank sold out.

Does this matter? Companies tend to want to be close to their shareholders, which could lure more companies away from Britain wholesale costing jobs and tax revenue if they change where their shares are listed, said Professor David Bailey of the University of Birmingham.

If London shrinks, it could also have an effect on its broader attractiveness as a place to raise money.

“Ultimately if London isn’t seen as an attractive market for bigger companies to list their shares, this raises a question mark over whether UK firms can attract money,” he said.

London also hosts vast debt markets, as well as metals trading markets, a complex insurance market and other services big companies need.

If the central reason for being based in London starts to fade, these other markets could be hurt too.

The government will be keen to avoid this. While Britain’s reliance on the City has been seen as a weakness since the financial crisis, it still hosts hundreds of thousands of high-paying jobs. On top of that, the Treasury raked in £79bn of tax receipts from the financial sector in 2023, according to research by PwC.

At the same time, this year London regained its crown as the biggest stock market in Europe, leapfrogging Paris.

London lost its top place in 2022 following Brexit and former prime minister Liz Truss’s mini-Budget. But recent political malaise in France has hit its stock market too.

While competing with New York may now seem like a dream, keeping London as Europe’s financial capital is far more realistic.