UK Finance has called upon the government to implement penalties for startups that benefit from state aid and later list on foreign stock exchanges.
This move comes amid rising concerns about London’s declining stock market, which has struggled to keep up with international competitors.
Concerns Over London’s Stock Market
British business leaders have been concerned for years about the decline of London’s stock market compared to global exchanges, notably in the US.
High-profile departures, such as the decision by Cambridge-based chip designer Arm to list in New York despite lobbying efforts from Prime Minister Rishi Sunak, have exacerbated these worries.
UK Finance’s Proposal
UK Finance’s paper, co-authored with consultancy Global Counsel, proposes that businesses receiving state aid be required to maintain their listings on UK stock exchanges or repay their subsidies.
The recommendation aims to ensure a ‘two-way commitment’ between the government and startups.
Proposed Remedies
Various solutions have been suggested to counter the exodus of companies listing abroad.
Last year, the Financial Conduct Authority introduced reforms to make it easier for startup founders to retain control.
UK Finance also proposed tapering government support for startups rather than abruptly ending it when companies grow to a certain size.
CEO Perspectives on the Issue
Julia Hoggett, chief executive of the London Stock Exchange (LSE), pointed out that UK companies face disadvantages due to opposition from British asset managers against larger, US-style remuneration packages.
Conor Lawlor, managing director for capital markets and wholesale policy at UK Finance, stated their aim is to make the UK an attractive destination for company growth and success.
Data Reflecting Market Decline
Data from the LSE shows a significant decline in the number of companies listed on London’s main market, from 2,101 in 2003 to 1,022 today.
This decline underscores the urgency for measures to address the issue.
Additional Suggestions for Improvement
UK Finance suggested that making it easier for pension funds to invest in unlisted UK companies could provide significant benefits.
These measures are part of broader efforts to bolster the UK’s capital markets and retain companies within the country.
Next Government Actions
The next government is urged to implement these recommendations to strengthen the UK’s position as a leading stock market.
Penalties for startups listing abroad after receiving state aid could be a crucial step in this direction.
Industry Reactions
Industry leaders and experts have offered mixed reactions to the proposals, highlighting the complexity of the issue.
The call for penalties reflects a broader strategy to revitalise London’s stock market and ensure startups contribute to the national economy.
By fostering a ‘two-way commitment,’ these proposals aim to secure the UK’s future as a hub for innovative and growing companies.