Mark Austin is a corporate partner at law firm Freshfields and author of the UK government's Secondary Capital Raising Review
Since Lord Hill published his UK Listings Review last year, the progress that the Treasury and Financial Conduct Authority have made in reforming UK capital markets has been bold and speedy. They deserve huge praise for that.
The process continues. My Secondary Capital Raising Review was published last month, with the aim of making fundraisings in the UK cheaper and more efficient. Its findings were accepted by both the chancellor and the FCA. The FCA is also currently discussing further significant listings reforms with the market as part of its Primary Markets Effectiveness Review.
I am confident that during the course of next year, we will have a modernised and fit-for-purpose listings regime in the UK as a result, one that will bear comparison with any other listings jurisdiction in the world.
We can see that our international peers are also thinking along the same lines. In the process of reforming themselves, in many cases, they are following some of our ideas – which must mean we are doing something right. This highlights the fact that the UK capital markets and London as a financial centre are in a very real foot race with our international peers, in what are increasingly competitive global capital markets, where many more venues than in the past can cater for global investors and large companies.
While the UK was in the EU, we were very often the default global listings choice for many international and domestic companies, as well as for companies that, for whatever reason, did not want to go public in the US.
That is not necessarily the case any longer. And we need to be bold and brave in our reform thinking right now in order to ensure that the UK capital markets stay as relevant on the global stage for the next two decades as they have been in the past 20 years and further back.
In fact, the opportunity is bigger than that, it is to become even more relevant. With all our natural historical, language and time zone advantages, amongst other things, we have the opportunity to be the world’s leading independent, neutral, stable financial venue.
But we cannot be complacent about maintaining and advancing our position. Regulatory reform is only one of the areas that we need to address.
We need to look holistically across our public, quasi-public and private capital markets in the UK and ensure that they are joined up, asking how we make sure that we have an ecosystem that enables and encourages founders and their businesses to want to start themselves here, grow here, scale here — and to stay here.
It also requires discussions in other areas – for example, around investor attitudes in the UK capital markets and the distinction between value and growth, how to drive better liquidity in the public capital markets, how to ensure stable IPO after-markets, re-examining our approach to remuneration policies and the restrictions they place on directors and employees at listed companies.
Other topics include the approach and influence of proxy advisers, ensuring joined-up tax policies, including in relation to using them to encourage businesses to base themselves here and then stay here, unlocking pension fund investment in capital markets, as Lord Hill discussed in the UK Listings Review, as well as broadening investment research.
Some of these are legal or regulatory issues in nature, others are either wholly or partly attitudinal. They are all issues that the newly formed Capital Markets Industry Taskforce is already starting to consider and will seek to drive the debate on. But they also all need to be looked at and discussed openly and honestly by stakeholders across the UK capital markets if we want to keep ourselves relevant on the global stage.
As I have said before, there is no point in having theoretically perfect UK capital markets if issuers and investors choose to use other markets.
And the prize is a much bigger one than just for the position of the UK capital markets, and London as a financial centre, as a leader on the world stage. Thriving and relevant UK capital markets, both public and private, benefit the UK economy generally, driving more jobs, higher wages and overall economic growth for the benefit of everyone.