London’s market makeover: Are the new listing rules working?

Almost a month on since the London Stock Exchange’s new listing rules came into effect, we take a look at whether they’re starting to their desired effect of revitalising the London markets.

But first, let’s take a minute to remind ourselves of the reforms announced in July, as neatly summarised in my colleague Bob Huxford’s previous article:

• Simplify the regime by merging the premium and standard segments into a single “commercial companies” category
• Permit issuers to have dual class share structures which can confer greater voting rights on certain parties such as founders, institutions and sovereign wealth funds
• Abolish requirements for shareholder approvals on significant transactions and related-party transactions

Pleasingly, early signs would suggest that they are. Last week CK Infrastructure Holdings, one of the world’s largest infrastructure groups, became the first company to list in London since the reforms, which its Deputy Managing Director hailed as “very welcome”.  Underscoring the appeal of the UK under the new listing rules,  the Hong Kong based investor is said to have chosen to launch a secondary listing in London to expand its investor base, taking advantage of the new category created by regulators to attract more international firms with a primary listing overseas.  

With City minister Tulip Siddiq called the listing a “strong vote of confidence in Britain’s capital markets, it is hoped that the reforms will help build on the already promising pipeline of new listings recently highlighted by LSE bosses, and the steady growth in IPO activity experienced in H1 2024. But it’s still early days and more remains to be seen before we get too excited. This is particularly true when considering that there are many who say that more needs to be done if we are to revive the UK markets – Ed Warner in The Times for example today highlighted that the reforms may be welcome but they must be made to work by a ‘revitalised’ fund management industry. 

The story does not stop there; rewriting the listing rules is just one of a series of initiatives by regulators, the new Labour government, and the previous Tory administration to counter the well-documented decline in the UK markets. The proposals include a UK ISA aimed at boosting the stock market by encouraging retail investors to buy British shares. Additionally, there are plans to roll back MiFID II rules inherited from the EU, which have been blamed for harming UK equities by reducing the volume of investment research published by stockbrokers.

 This would follow the abandonment of another set of rules inherited from Brussels which limited the bonuses that banks were allowed to pay senior staff to boost the international competitiveness of UK lenders compared with their peers on Wall Street. And on top of this, you’ll have read a lot about planned pension reforms aimed at encouraging pension schemes to invest in listed UK equities and unlisted British companies.

So, with September just around  the corner – traditionally one of the busiest times of the year in the City as the capital markets spring back into life after the summer holidays – it looks as though the tides are in the early days of turning. This should be fuelled by the predicted further easing of inflationary pressures, and any associated interest rates cuts that come with it.