London Stock Exchange Faces Challenges in Maintaining Financial Centre Status
Despite claims of a turnaround, the London Stock Exchange faces mounting challenges in maintaining its status as a global financial centre. The benchmark FTSE 100 share index has remained stagnant for years, while the number of new issues has slowed significantly. However, industry leaders remain optimistic about the future.
Julia Hoggett, CEO of the London Stock Exchange, believes that it takes time for facts, narrative, and perception to align, but insists that there are reasons to be optimistic. Andrew Bailey, Governor of the Bank of England, also expresses positivity, stating that Brexit’s impact has been less severe than initially predicted and that the UK has opportunities to capitalize on.
However, experts argue that London’s prospects as a financial centre are not as promising as hoped. While the city has the potential to maintain its status, global forces are working against its rebirth. At the turn of the century, London stood at the forefront of global finance. American regulations and the consolidation of Europe’s financial markets into a single centre gave London an advantage. New Labour’s “light touch” regulatory regime further enhanced its appeal.
Unfortunately, the financial crisis and regulatory crackdown on speculative practices caused a decline in London’s status. The city’s anti-free market political mindset has also hindered its revival as a financial centre. Brexit has not yet provided the desired opportunities to boost competitiveness in the sector. The City’s interests were largely overlooked during withdrawal negotiations, and regulatory “equivalence” has been limited compared to other countries.
While some European financial centres have benefitted from post-Brexit financial fragmentation, the US has emerged as the go-to place for international finance. The London Stock Exchange’s inability to attract new share listings reflects a wider issue. Companies like Arm Holdings opt to list in the US due to greater liquidity and lower capital costs.
Additionally, major US multinationals repatriate funds from the UK and European economies, which are then invested in the US through share buybacks. British pension funds and retail investors also show a lack of attachment to the domestic economy. The globalisation of finance has both impoverished and enriched different economies.
Government attempts to improve competitiveness through reforms have been largely ineffective. While regulatory requirements contribute to the challenges, they are not the primary issue. London’s future appears more likely as a subsidiary to Wall Street rather than a credible rival.
As London faces these challenges, it remains to be seen whether the city can maintain its position as a global financial centre or if it will be overtaken by other hubs around the world.
More detail via The Telegraph here… ( Image via The Telegraph )
