An open letter to Rachel Reeves from Stephen Yiu, CEO of Blue Whale Capital
Dear Chancellor,
Your ambition to unlock long-term investment for British enterprise is the correct one. But that ambition is being directly undermined by a deep, structural flaw at the very heart of the City. The flow of growth capital to our most promising new companies is being throttled, not by a lack of willing investors, but by a conflict in the primary mechanism designed to allocate it.
Our national stock exchange has become a neglected subsidiary, a mere rounding error within a global data conglomerate whose strategic priorities understandably lie elsewhere. To pretend it is thriving is to ignore the evidence.
The London Stock Exchange has fallen outside the top 20 markets in the world for Initial Public Offerings – behind Mexico. So far this year, New York has raised 60 times more capital for companies listing there than has London. This forces our best British firms to delist, to look abroad for capital, or simply to remain private, starving the wider economy of investment and growth, and hampering public participation in the wealth of the country. The consequences for UK plc are stark.
Independence for the LSE
There is one structural reform that could unlock more potential than any single tax measure: the government should champion the spin-off of the London Stock Exchange into a new, independent, publicly listed British company.
This is not state intervention, but strategic liberation. An independent LSE, with its own board and management team dedicated solely to UK growth, would be a nimble and effective partner for the government in driving capital markets reform.
An independent LSE would become a powerful magnet for the very domestic capital you seek to unlock. Imagine the impact of a share register anchored by the British pension funds that we need to invest once more in Britain, reversing years of their retreat from UK companies. The government itself could buy a symbolic cornerstone stake as a sign of national commitment.
The playbook for this already exists. In 2022, LSEG successfully divested its BETA+ platform while establishing a new, mutually beneficial strategic partnership. A similar model could be employed where LSEG retains a minority stake in the stock exchange and access to market data it requires to continue its own growth trajectory.
Over the past 300 years, London has formalised share trading, given it scale, and drawn capital from every corner of the globe. It can and must do so again. Failing to act now risks allowing our primary capital market to slide into irrelevance. Championing a new future for the London Stock Exchange would be a defining boost to British enterprise. It is an opportunity to turn a rounding error at a conglomerate into a resounding economic success.
Yours sincerely,
Stephen Yiu
Blue Whale Capital
Disclosure: Stephen Yiu is the CEO of Blue Whale Capital LLP, an FCA regulated firm which has invested in the London Stock Exchange Group for the funds it manages.