London’s Listing Rules Drive British Firms to Exit for Good

The current regulatory framework for listings in London is prompting British companies to reconsider their presence in the capital. According to Paul Scully, a former Minister for London, each firm that departs from the London Stock Exchange (LSE) increases the likelihood of subsequent exits. His comments follow the proposed merger between Anglo American and Canada’s Teck Resources, which highlights flaws in the UK’s listing regime that could have significant financial implications.

Scully expressed concern that rules meant to protect London’s market integrity are inadvertently pushing companies like Anglo American away. He noted that the CEO of Anglo American has not committed to maintaining a long-term primary listing in London, stating, “I’m not making any such pledge.” As the merger moves forward, the new entity will be incorporated in London but plans to shift its headquarters to Vancouver, raising questions about its future listing location.

The merger creates immediate challenges for Anglo American, as Canadian indices may eject the newly formed company due to its London incorporation. This situation places the company under pressure from index investors, which could lead to a shift towards listings in Toronto or New York.

The regulatory environment is a crucial factor in this exodus. Under current Financial Conduct Authority (FCA) rules, UK companies that primary list overseas cannot benefit from the UK’s secondary listing category. This category was introduced in the FCA’s 2024 reforms but only applies to non-UK incorporated companies. Consequently, Anglo American would be faced with either adhering to stringent UK listing requirements or relocating its incorporation outside the UK, a move that would significantly reduce its corporation tax obligations.

Scully’s commentary underscores the adverse impact of these regulations on the UK’s tax revenue. If companies like Anglo American leave for less burdensome environments, the UK could sacrifice billions in potential tax income. He pointed out that the FCA’s policies currently favor foreign firms, creating a two-tier system where overseas companies have easier access to secondary listings compared to UK firms.

The competitive landscape for capital raising is shifting. The LSE has slipped to the 25th position among global capital-raising centers, as British companies, including the money transfer firm Wise, contemplate moving their primary listings to the United States. This trend reflects a broader concern that UK regulations are deterring domestic firms while welcoming loss-making foreign startups.

As the UK government, led by Chancellor Rachel Reeves, considers tax increases in the upcoming budget, Scully argues for a reevaluation of the current listing framework. He suggests that the government eliminate the exclusion of UK companies from the secondary listing category to foster a more competitive environment. “Second best beats nothing at all,” he remarked, referencing a recent editorial in the Financial Times advocating for greater flexibility in the regulatory structure.

In the context of international regulatory changes, the United States Securities and Exchange Commission is also consulting on reforms that would require dual listings for certain companies. Scully believes that London could benefit significantly from these developments, provided it adapts its rules to match the flexibility offered to foreign firms.

The departure of prominent firms like Flutter Entertainment, which moved its primary listing to New York in 2024, represents a concerning trend. Scully stresses that each exit diminishes London’s status as a global business hub and makes further departures more likely.

With Anglo American’s leadership indicating uncertainty about its future in London, Scully urges the government and the FCA to act swiftly. He believes that if the current regulatory environment remains unchanged, more companies will follow in the footsteps of those that have already left, further diminishing the UK’s business landscape.

In conclusion, the UK has a pivotal opportunity to reform its listing rules and position London as a favorable destination for both domestic and international firms. Without significant changes, the ongoing trend of companies relocating may become entrenched, ultimately undermining the UK’s economic stability and growth potential.