London Stock Exchange suffers biggest outflow since financial crisis

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The London Stock Exchange is set for the worst exodus since the financial crisis, amid growing fears that more FTSE 100 companies will leave the UK for New York.

A total of 88 companies have delisted or transferred their primary listing from London’s main market this year, with only 18 companies replacing them, the London Stock Exchange Group said.

While this is the largest net exodus of companies from a major market since 2009, the number of initial public offerings remains short, with bidders targeting London-listed groups and the number of new listings at 15 on record. It is expected to be the lowest in 2020.

The exodus continues despite efforts by the UK government, regulators and LSE to make the city more attractive by reforming market rules and the national pension system.

Equipment rental company Ashtead, which has a market valuation of £23bn, this month became the latest major company to propose moving its primary listing from London to New York. The company will join six other FTSE 100 groups that have ditched their blue-chip index in favor of overseas venues since 2020.

Including Ashtead, these listed companies had a combined market valuation of nearly £280bn as of Friday, around 14% of the current total value of the FTSE 100.

Defectors include £39bn gambling giant Flutter, which owns Paddy Power, and £55bn building materials group CRH. Both companies have moved their primary listings to New York in the past 18 months.

A series of acquisitions by private equity bidders also depleted the exchange. Cybersecurity group Darktrace and investment platform Hargreaves Lansdown are among the companies that have agreed acquisitions this year.

“If we don’t have strong equity capital markets, we can’t be taken seriously as a world leader in finance,” said Charles Hall, head of research at brokerage firm Peel Hunt.

“The UK market has no God-given right to be a primary listing venue, but it needs nurturing and support to succeed in an increasingly global market,” Hall said, adding that unless action is taken “More companies will exit,” he added.

Factors cited by companies relocating their primary listing to New York include the prospect of a deeper investor base and improved stock liquidity.

For some companies, the move reflects growth in their North American operations. Ashteed makes 98% of its operating profit in the U.S., while plumbing group Ferguson, which moved in 2022, earns 99%.

Nine companies in the FTSE 100, including data group Experian and education company Pearson, derive more than half of their revenue from the United States, according to Bank of America.

An analysis by the Financial Times last year identified London as the European stock exchange most at risk of suffering from an exodus of large companies to the United States.

The analysis ranked companies based on valuation discounts relative to their U.S. peer group, share of revenue generated in the U.S., and percentage of North American investors on the registry.

The 18 large London-listed groups identified as posing a flight risk included Rio Tinto and British American Tobacco. Both companies are under pressure from investors to move their primary listings to Australia and the United States, respectively.

“The valuation gap between the UK and US is widening further as more UK companies consider relocating to the US,” Goldman Sachs said in a note on Friday.

The FTSE 100, which focuses on “old economy” sectors such as energy and mining, has risen nearly 8% this year. The U.S. benchmark S&P 500, home to high-growth stocks such as Magnificent Seven Technology Group, returned about 27% over the same period.

French pay-TV operator Canal+ could be valued at more than 6 billion euros when it floats in London on Monday as part of its spin-off from media conglomerate Vivendi, analysts and people close to the operation say. It is said that there is a sex. The valuation is the highest for a major London listing since Haleon was spun off from GSK in 2022.

But one senior banker in London said he expected more listings to move to the US next year, especially among fast-growing companies. “People (generally) feel they can get a better deal in the U.S. because it’s a much larger capital market than anywhere else right now,” he said.

Sharon Bell, European equity strategist at Goldman Sachs, said she felt a lack of interest from domestic investors was pushing many companies seeking higher valuations away from the UK.

Following Ashtead’s announcement, one FTSE 100 chief executive said it was “very disappointing”. President-elect Donald Trump’s “America first” rhetoric could also prompt companies to accelerate delisting plans, the executive added.

Many advisers and executives say privately that recent reforms, such as plans to change pension plans and a review of UK listing rules, have not yet changed the game.

But LSEG chief David Schwimmer said last year that the idea that a U.S. listing would result in a higher valuation was a “myth.”

City advisers expect the British market to suffer if Chinese-founded fast fashion group Shayne goes ahead with its planned IPO in London.

“Companies will make tailored decisions depending on their business structure and location,” LSEG said in a statement. “The UK market remains the third-largest market in the world by capital raised year-to-date and is experiencing the most dynamic transformation anywhere in the world.”

Finance Minister Rachel Reeves said on Friday that the listing on Canal Plus was “a vote of confidence in the UK capital markets, the stability we have and our transformation plans”.

But one FTSE 250 executive said more work was needed to attract investors.

“I don’t think it’s high on the government’s priority list,” the official said, “even though it’s something that the government regularly promotes.”

Visualization by Alan Smith and Patrick Maturin. Additional reporting by Ivan Levingston and Mari Novik in London