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FCA shakes up listing rules but ‘more work to be done’

The industry has broadly welcomed new FCA rules to attract exciting companies to London’s exchanges, but there is a general consensus that the changes should be the beginning of a comprehensive package of measures to improve London’s standing on the global stage. 

The FCA have published new rules for listings that aligns the UK with international markets in an effort to bolster London’s ailing equity markets.

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The policy statement released today, beginning with ‘The UK’s capital markets are the engine room of our economy’, outlines an array of changes to listings rules, including amendments to shareholder voting requirements and abolishment of the ‘premium’ and ‘standard’ lists, which are to be replaced by a single category.  

UK authorities have been under pressure to act to support London’s capital markets, and today’s FCA policy statement is a direct result of initial work started by the last government.

“A thriving capital market is vital in delivering investment to growing companies plus returns and choice to investors. That’s why we are acting to make it more straightforward for those seeking to list in the UK, while retaining vital protections so investors can help steer the businesses they co-own,” said Sarah Pritchard, Executive Director, Markets and International, at the FCA.

“Regulation is only part of the answer in helping the UK achieve sustainable growth. Other factors also play a significant role in influencing where a company decides to list. We’re committed to continually working together with all those who have a part to play in supporting a thriving UK capital market and thank everyone who has contributed to this work so far.”

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With the FCA doing their part to help promote the UK’s capital markets with these early and targeted rule changes, the industry will also have to do theirs to capture the interest of global companies seeking a listing.

“The FCA has simplified the rules for companies looking to list in the UK,” explained Matt Britzman, senior equity analyst, Hargreaves Lansdown. “This comes after the UK has been shunned by companies, both new and existing, due to an overcomplicated system and valuations that lag some of the overseas markets on offer. Simplified listing rules are a first step, but there’s still more work to be done if the UK wants to regain a reputation for nurturing exciting new businesses.

London was once seen as a global power house for international companies seeking to raise capital. However, the number of companies listed in London has plummeted and the IPOs have slowed to a snail’s pace. 

The reaction to today’s rules changes has been positive and seen as a step in the right direction, yet some signal the new Labour government has its work cut out to take London back to its former glory.

“Any policy change that can incentivise or encourage more firms to list in the UK should be welcomed with open arms,” said Dan Moczulski, Managing Director UK, eToro.

“There is a lot of talk about growth from our new government right now. To deliver it, we need a thriving capital market. This requires an environment where companies see the UK as an attractive place to list, and where investors want to invest. 

“The virtuous cycle is clear: more companies listing in the UK attracts more investors, both domestic and global, boosts share prices, and generates more wealth, which in turn encourages even more companies to list. This is arguably the holy grail for our economy in terms of growth. While Jeremy Hunt set his sights on this goal, it’s now up to Rachel Reeves to make it a reality. Hopefully these new rules can help generate momentum for further policy initiatives, laying the foundation for a more dynamic and prosperous UK capital market.”

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