City risks losing tech IPO battle to New York, report warns

The UK must take urgent steps to improve London’s attractiveness as a destination for tech company listings over New York, a report from the Square Mile’s local authority has said.

A review of capital markets by the City of London Corporation said policymakers need to act to address the City’s disparity with rival destinations such as the US, where more than half of all fintech listings occurred since 2015.

Measures could include gaining expertise in growing sectors, taking advantage of emerging market opportunities, capitalising on innovation in the IPO process, and leading on sustainability concerns.

Challenges to the UK’s attractiveness identified by the report also include increasing competition from other forms of finance, a shrinking market and increasing IPO costs for smaller firms, and ongoing Brexit uncertainty.

READ  VCs warn City funds that stance on tech IPOs is ‘catastrophic miss’ for London

Catherine McGuinness, policy chair of the CoLC, said rulemakers need to “act now to ensure that the UK remains internationally attractive as a listing venue, while maintaining high regulatory and governance standards”.

“It is particularly crucial that we address these challenges as a priority, to ensure London can continue to provide a vibrant economy, delivering much-needed funding for a range of businesses in the UK and across the world,” McGuinness added.

The value of UK IPOs has more than halved in the last five years, while the US market has more than quadrupled. The report said this was largely due to the influx of major tech listings in New York, while the advent of regulation such as MiFID II has favoured larger, more profitable companies that can afford costly research spending.

With the UK’s exit from the European Union still causing uncertainty for businesses, KPMG head of capital markets Linda Main said London should be aware of rapidly-shifting sentiment.

Around 53% of London’s investor base is international, the most diverse of any major global exchange.

“The key thing will be maintaining the large pool of investors in London because the investors are here, the money’s here, the companies will come here. If that pool of investors moves somewhere else, for whatever reason, that will become a big issue for London,” Main said.

READ  London set to overhaul rules to attract more tech IPOs following Deliveroo listing

However, the corporation identified that London does pull ahead in some areas. The report said the City is home to 756 international listings, far more than the Nasdaq’s 409.

But Lord Mayor William Russell said the City cannot “afford to be complacent”, particularly following the publication of the recent listings review by Lord Jonathan Hill that recommended further opening up the regulatory regime.

“Other centres are vying with London to attract IPOs, especially from entrepreneurial and fast-growing sectors such as tech, so we must consider how to remain competitive,” Russell said in a statement alongside the report.

To contact the author of this story with feedback or news, email Emily Nicolle