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What does the future of the London Stock Exchange look like?

18/06/2023

Is London’s stock market losing its lustre?, asked the BBC in March. A week later, CNN stated that “London fears for its future as companies defect to Wall Street”.

But is the picture really this bleak for the London Stock Exchange? And why are such headlines appearing? 

 

“A sort of Jurassic Park”

In December 2021, hedge fund manager Paul Marshall stated that London was “in danger of becoming a sort of Jurassic Park” as a result of the City’s focus on dividends rather than growth. He described how companies such as the US and China were attracting global companies to list on their exchanges – including companies based in the UK. 

Even UK pension funds have decreased their focus on UK stocks in recent years, with fund allocation to stocks falling from around 73% in 1997 to just 27% in 2011. 

The London Stock Exchange has been around, in some form, since the 17th Century. When it first began, it listed just exchange rates and a few commodities – but by 2003, it featured over 2,000 companies. 

Since then, there are just half that number on the LSE – and the UK has just a 4% share of all global markets. 

 

Can things pick up?

“London needs to reinvigorate its stock markets”, says CNN. Aquis Exchange CEO, Alasdair Haynes, believes that regulation should be changed to make it easier for smaller companies to list – which would then create an exchange that’s more about growth than predominantly focused on dividends. 

It’s possible that the mooted Edinburgh Reforms could make a difference. The aim of the reforms is to turn the UK into “the world’s most innovative and competitive global financial centre”.

In 1986, when the London Stock Exchange was falling behind its international competitors, a set of reforms known as the Big Bang was announced – and was successful. Could the same happen again this time around?

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

 

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