Data from financial education service, Buy Shares, indicated that the number of companies trading on the London Stock Exchange (LON:LSE) dropped by 396 – or 16.63% – between the Novembers of 2015 and 2020.
In 2015, the number of companies listed on the LSE stood at 2380, though this number had fallen to 1984 by last month. During the period, the highest number of monthly trades took place in March 2020, with an average of 2.03 million, versus the lowest number, 760,180, recorded in August 2020.
According to Buy Shares, a reason for the shift in the number of companies traded on the world-famous exchange is (perhaps inevitably) Brexit uncertainty, which has at the very least seen many companies take up additional listings at alternative exchanges.
Further, the company said that listings demands high fees, represent a regulatory burden, and comparatively high costs versus private markets – to the extent that small and mid-cap companies have found it more difficult to justify LSE entry.
A key driver behind this data, though, is the particularly adverse effect that the COVID-Brexit combination has had on UK securities in 2020. Between “a wipe-off [of] billions in stock values alongside extreme volatility and sell-offs”, the LSE was host to some of the worst-afflicted pandemic sectors, including air travel, energy and financial services.
Speaking on the reduced number of companies listed on the LSE, Buy Shares Editor, Justinas Baltrusaitis, said: “The relentless rise of private equity has given companies an attractive alternative to listing on a major platform like the London Stock Exchange. Companies are going private at a high rate due to depressed share prices, low-interest rates, and the massive attraction of Private Equity. Attractive valuations have enabled Private Equity funds to acquire companies with strong fundamentals at prices below recent norms.”
“However, the declining number of companies on LSE might increase in the future, considering that there are calls for government help. There are calls for the government to step in, especially in the backdrop of Brexit. With help from the government, LSE can attract global businesses to list in London, knowing they have access to the deepest capital pool, against a fair and consistent regulation.”
Further, the LSE will continue to benefit from its prime location, history, and social infrastructure, which other indexes will find hard to replicate.