City backlash over shake-up of listings rules

Some of Britain’s largest pension schemes have sounded the alarm over planned changes to the UK’s rules on stock market listings, claiming they risked making domestic firms ‘less attractive’ for investment.

Ten major pension funds, which collectively manage around £300billion in assets and include schemes run on behalf of the Church of England and HSBC UK, said, in an letter to the Financial Conduct Authority (FCA), changing laws on listings would not lead to ‘healthy capital markets’ and would ‘exacerbate’ existing difficulties in attracting investment to the City.

Loosening rules would make UK-listed firms ‘less attractive’ to ‘well-informed, long-term investors’, diminish the UK’s reputation and attractiveness as the world’s ‘quality’ market, and its role as a beacon for high corporate governance standard, the letter read.

It added: ‘We are responsible for the retirement outcomes of millions of British citizens who work and live in the UK. 

We want to see the UK continue to thrive as a global financial centre. We do not think the changes proposed will solve the fundamental issues affecting our equity markets.’

The warnings come as the FCA and Government ministers seek to boost the City’s reputation as a destination for companies to list.

Proposed changes include removing the need to have three years of audited accounts before listing, and loosening rules around dual-class shares which give company founders more voting power than ordinary investors.

Calls for lighter regulation came after an exodus of UK firms from London to the US, including computer chip maker Arm, whose owner SoftBank decided to list it on Wall Street despite lobbying from the Government.

In a separate response to the FCA proposals, the Pensions and Lifetime Savings Association (PLSA), which represents schemes providing retirement income to over 30m people, said it believed the changes would ‘weaken shareholder rights’ and remove ‘important checks and balances’.

Director of policy Joe Dabrowski said governance standards were not the cause of a decline in new listings.

‘The new rules run the risk of having a contrary effect to what is hoped for, by potentially reducing the pool of institutional and retail investors willing to invest in UK-listed companies,’ he added. 

‘The debate has intensified after Turkish chemical giant WE Soda cancelled its float, citing ‘extreme investor caution’.

While considered by many to be a blow to the Square Mile, some argued the firm had given off warning signs and demanded a valuation that was too high – highlighting that current regulations may have spared investors from backing unreliable companies.