29 June 2023

FT's Plender: Shed no tears over the travails of London’s equity market

The slump in initial public offerings in London has become ever more striking. The decision by WE Soda, the world’s largest soda ash producer, to abandon plans to list in the UK comes after CRH, the world’s largest building materials group, decided to switch its listing from London to Wall Street.

Fintech group CAB Payments may be aiming for an £850mn London issue but this scarcely compensates for chip designer Arm rejecting the British government’s plea to float here. All of which sits uncomfortably with prime minister Rishi Sunak’s aspiration to make financial services one of the country’s five key growth sectors.

Downbeat commentary has ensued, questioning whether the City has become too bureaucratic and risk-averse since the 2008 financial crisis, while losing competitiveness because of Brexit. Yet much of this soul searching, like the government’s aspiration to make London the world’s most competitive financial centre, is rooted in a mercantilist view of global financial competition as a zero-sum game.

We are back to picking winners. Or rather, former winners. For one of the lessons of the financial crisis was that the apparently miraculous growth in financial services was an illusion, stemming from excessive risk-taking along with frenetic innovation in complex financial products of questionable social utility. Of course, the social utility of the equity market is not in question. And it has to be a cause for concern that the share of the equity market owned by UK insurance companies and pension funds fell from over 50 per cent in the late 1990s to 4.3 per cent at the end of 2020. This has prompted a debate as to how unicorns (unquoted tech companies valued at more than $1bn) can find access to risk capital....

 much more at FT

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