The former boss of the London Stock Exchange Group has warned that the capital’s beleaguered bourse is unlikely to see a revival unless the next government pushes through a major overhaul of City rules.
Xavier Rolet, who headed up LSEG between 2009 and 2018, said London’s stock market needed sweeping changes including the removal of “punitive regulations” like so-called Solvency II rules, which set capital requirements for insurers.
He added that “hopes of a stock market liquidity revival are likely to be disappointed” if policymakers fail to give additional support.
“US equity markets are more or less ten times more liquid than UK and Europe combined,” Rolet told The Telegraph.
“It’s not an issue of confidence, or tweaking this or that rule, or having a sovereign fund conveniently on hand to inject one-off liquidity as desired or twisting the arm of index companies to increase the weight of domestic issuers.”
Both main parties have vowed to unlock more capital into the UK’s public markets. Shadow chancellor Rachel Reeves has said Labour would create a British sovereign wealth fund if it wins the election on 4 July, with the party broadly backing the government’s City reform agenda.
Chancellor Jeremy Hunt is also aiming to streamline the listings process and boost capital markets activity through the wide-ranging Edinburgh Reforms first announced in 2022.
The former London Stock Exchange chief’s comments come as the capital’s stock market struggles with a wave of foreign buyers pouncing on London-listed companies’ relatively low valuations compared to their overseas counterparts.
At least seventy-five companies have either left or are close to leaving the LSE already this year, according to investment bank Peel Hunt. Of these, 20 are in the FTSE 350, eight are Smallcap, 37 in the AIM growth market, and 10 in the LSE’s other exchanges.
That represents a total of £94bn leaving London exchanges. The vast majority – £84bn – of that value is held in firms listed on the FTSE 350.
Meanwhile, the LSE has seen a dearth of big-ticket listings and major names including Arm, Flutter and Marex snubbing the capital for higher valuations in New York.