Britain’s largest holder of domestic equities has warned against lowering the standards of London’s listing rules in order to revitalise an increasingly barren IPO market.
As reported by Reuters, Britain's Local Authority Pension Fund Forum (LAPFF), which represents around £350 billion worth of public sector pensions, said it was "very concerned" about the efforts of the Capital Markets Industry Taskforce (CMIT) to dilute British listing and governance regulations.
CMIT, which is chaired by the London Stock Exchange’s chief executive Julia Hoggett, backs measures to make it easier for global companies to list in the UK, including a relaxation of rules surrounding executive compensation.
Pension funds have historically been among the largest investors in UK equities, but their proportionate holdings have dramatically decreased over time.
According to Schroders, defined benefit allocation in UK equities fell from over 50% in the 1990s to just 2% in 2022.
CMIT’s own data suggests that domestic pension investment has fallen from 53% to 6% over the last 25 years (a collapse of 89%), equating to a withdrawal of £1.9 trillion from UK equity markets over that period.
“We recognise that a range of policy and regulatory structures over many decades have unintentionally created this situation, but it is not the absence of high-quality assets that is our challenge, it is the absence of domestic capital supporting those assets,” CMIT wrote to Chancellor Jeremy Hunt in November.
"The main message coming from the CMIT is that the UK has been losing listings, primarily to the USA, because of overly onerous rules in the UK and that relaxing the Listing Regime is a solution to that," LAPFF chair Doug McMurdo wrote in the letter to LSEG.
But "we are concerned that the positions being taken by CMIT are neither evidence-based nor balanced, and some positions have little credibility in basic terms”, wrote McMurdo.
LAPFF called on LSEG to “make public any evidence it has regarding any link between the listing rules resulting in fewer listings or less investment”.
"In lobbying to lower the governance and listing regime the LSE not only risks loss of its reputation, but also 'poisoning the well' making the UK an unfavourable place to allocate capital,” McMurdo warned.
The London stock market has suffered a myriad of blows in recent years, with large caps including CRH, Kingspan and Flutter deciding to delist their shares.