LIt’s been another depressing year for those leaving the London stock market. Back in January, it was Flutter who was headed for the exit. Paddy Power, the owner of Betfair and Sky Bet, obtained a secondary listing in the US and said it would soon switch to a primary listing, which it did in May.
In December, we were still working on the same theme. Ashtead Group, a £27bn construction and rental company that has been listed in London since 1986, has announced plans to move its primary listing to New York. Just Eat Takeaway heading to Amsterdam is also a fugitive.
Of course, none of these companies will leave on a whim. Paddy Power says his US operation, FanDuel, will soon become his most important. Ashtead says it makes 98% of its profits in the United States. Just Eat says it only aims to cut costs and that the Netherlands is its home base. And in fact, only a handful of companies have moved their listed companies, which is tiny compared to the number of companies that have exited due to being taken over.
But both trends reinforce the impression that the London stock market is a sleepy place, with more companies leaving than arriving. This idea is supported by 2024 statistics. Nineteen companies entered the market, including 16 flotations or IPOs, and 88 companies were delisted for various reasons.
Such a narrow metric can be misleading about the health of the stock market and could rightly be opposed by the LSE at this point. Providing new capital to existing businesses is also important to success, and London fared much better in that respect than last year. The 328 follow-on offerings raised approximately £24.3bn of equity capital, far more than the £766m raised by the IPO. In terms of total procurement, Britain, the world’s sixth-largest economy, remained behind only the United States and India. It’s not bad.
However, even though a similar phenomenon is occurring in countries such as the United States, we cannot simply ignore the decline in the number of listed companies. For the stock market to generate vitality, it needs a strong supply of new entrants. According to the LSE, by the end of last year there were 1,005 companies in London’s main market, and at the current pace this number could fall below 1,000 by early 2025 for the first time in decades. is high.
It happened despite reforms designed to increase London’s attractiveness. Last year’s new listing rules gave companies more power to avoid shareholder votes and adopt dual-class share structures, particularly favored by tech entrepreneurs. Plans to reform the UK’s Corporate Governance Code, which applies to major market companies, have been revised to give it a more “realistic” or pro-competitive feel. British pension funds, which have been big sellers of British stocks for the past two decades, are facing pressure from all sides to increase the weight of UK public and private assets.
But in the deluge of consultations and reports, one obvious measure always gets sidelined. It is a reform of stamp duty on shares, or more fully known as Stamp Duty Reserve Tax (SDRT). This imposes a 0.5% tax on the purchase of shares in UK companies. The US, China and Germany impose no comparable tax at all, with only Ireland charging a higher rate at 1%.
Although not paid by market makers, stamp duty is a tax for both the end investor and the company, making the cost of capital slightly higher than it would otherwise be. The Capital Markets Industry Task Force report elaborates on this illogicality: “The UK currently taxes retail investors SDRT when they buy UK-listed Aston Martin shares, but not when they buy German-listed Porsche shares or US-listed Tesla shares. ”
sign up for today’s business
Get ready for work – all the business news and analysis you need every morning
Privacy Notice: Newsletters may include information about charities, online advertising, and content sponsored by external parties. Please see our Privacy Policy for more information. We use Google reCaptcha to protect our website and are subject to the Google Privacy Policy and Terms of Service.
After newsletter promotion
The reason for the reluctance to reduce or abolish them is easy to explain. The tax brought in £3.8bn to the Treasury in the 2022-23 tax year, but as critics have described, giving it to wealthy savers is a tough political sell. But the government needs to know how companies view it. “Of course, stamp duty will also be taken into account,” said the chief executive of a UK-based private equity firm worth 20 billion pounds, adding that an IPO is likely to take place within two to three years. I talked about it.
The harsh reality is that companies have choices about where to list. London still has many advantages, as demonstrated by its active market for follow-on funding. But if the government is serious about restoring capital markets, of which stock exchanges are the most important, in 2025, it is time to talk about stamp duty. It’s terrible publicity for London.
