Britain’s banking industry is calling on the next government to impose penalties on government-backed start-ups that list overseas, amid concerns that start-ups will choose overseas stock exchanges over London.
In a paper published this week, UK Finance suggested subsidies and tax breaks could be reversed, and argued that companies receiving government support should have a “two-way commitment”.
British businessmen and City executives have warned for several years that the London stock market is in decline compared with other exchanges, particularly in the United States, where they say some of the fastest-growing companies have an easier time attracting investment.
Recent exits from the London Stock Exchange include building materials company CRH, gambling company Flutter and plumbing products company Ferguson, but perhaps most frustrating for the LSE was its failure to attract the big-money listing of Cambridge-based semiconductor designer Arm, which opted to list in New York despite personal lobbying from Rishi Sunak.
In a paper co-authored with Global Counsel, a lobbying consultancy founded by former Labour business secretary Lord Mandelson, UK Finance suggested that promising to stay in the UK in exchange for government support could help stop companies from moving overseas.
The report writes: “The government should also consider how any expansion of taxpayer-funded support for early-stage growth companies could include a two-way commitment and be repayable in part or in full if beneficiaries ultimately choose to go public or relocate their valuable operations outside the UK.”
“It is a choice for UK companies to participate in the public markets and where they base themselves. But linking taxpayer support to a future commitment to use the UK public markets and operate in the UK makes a strong case.”
Regulators, politicians and business leaders have taken a range of steps to tackle the talent drain. Last year, the Financial Conduct Authority announced sweeping reforms to make it easier for startup founders to retain control, following the US model.
Julia Hoggett, chief executive of the London Stock Exchange, argued last year that British firms were not on a “level playing field” because British asset managers tended to vote against expensive US-style pay structures.
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UK Finance also suggested gradually reducing government support for early-stage start-ups, rather than suddenly cutting it off once they reach a certain size, and said there could be merit in making it easier for pension funds to invest in unlisted UK companies.
According to LSE data, there were 2,101 companies listed on London’s main market in 2003, but that number has fallen to 1,022.
