The UK has entered a financial “doom loop” as the once mighty London stock market goes down in flames.
The UK stock market is in meltdown and Labour urgently needs to save it (Image: Getty)
The heat is on and Chancellor Rachel Reeves has to take emergency action before the FTSE enters a death spiral from which it may never escape.
Major British companies are getting out, with the London Stock Exchange suffering the biggest exodus since the dark days of the financial crisis, according to today’s Financial Times.
The UK stock is set for the fewest company listings in 15 years. Instead, UK firms are making a beeline for the booming New York market.
Just a decade ago, the UK stock market was the third biggest in the world based on deals made, according to Dealogic, trailing only the US and Hong Kong.
Since 2014 we’ve plunged down the rankings to a humiliating 20th place. We’re doing fewer deals than Oman, Australia, Germany, Turkey, Malaysia and Poland.
And we’re only a whisker above Indonesia and Greece. It’s embarrassing.
Former Tory chancellor Jeremy Hunt belatedly woke up to the danger, and suggested a few changes to get the UK investing again.
Now Labour needs to drive them through while we still have a stock market to save. Basically, it’s all down to Rachel Reeves.
Worried, anyone?
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Companies floating on the booming US stock market raised more than $40billion last year, the equivalent of £31.5billion.
UK floats raised a meagre £790million by comparison, down 9% on the previous year, according to data from Bloomberg.
The grim truth is that firms don’t want to float in the UK, because they can’t access enough capital and end up with dramatically lower valuations as a result.
While new IPOs dry up, established FTSE companies are pulling out.
Last week, it was the turn of equipment rental giant Ashtead Group to swap London for New York.
It follows building materials group CRH, travel agent TUI, packaging supplier Smurfit Kappa, plumbing firm Ferguson and betting specialist Flutter Entertainment.
UK chip maker ARM Holdings is now listed in New York. Mining giant Rio Tinto is under pressure to up sticks. So is cigarette maker British American Tobacco.
Most terrifying of all, oil and gas giant Shell is being urged to list on Wall Street instead of the FTSE 100.
Shell is one of our biggest companies worth £152billion. If it goes, we’re sunk.
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At the same time, foreign investors are taking advantage of dirt-cheap UK valuations to snap up a string of household names.
Britvic, Hargreaves Lansdown, Morrisons, Royal Mail and Virgin Money are going, going, gone.
Simon French from City stockbroker Panmure Liberum warns we’re in a “doom loop” as investors snub the underperforming UK, which makes performance even worse.
The US now looks even more appealing as president-elect Donald Trump pledges to slash corporate taxes and red tape, driving Wall Street to all-time highs.
Over here, Reeves piles on £25billion of taxes while Angela Rayner‘s employments rights bill threatens another £5billion of red tape to please the unions.
The difference couldn’t be more stark.
The London Stock Exchange has launched “dynamic reforms” to put out the flames, while Labour’s plan to create “pension megafunds” may unlock billions to invest in UK businesses.
Labour needs to sort this out now. The stakes could not be higher.
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