What’s behind the FTSE exodus: Why Britain’s public market woes aren’t all Brexit’s fault – and there’s no ‘silver bullet’ to fix it
Recent months have seen cash flood into the City to snap-up publicly listed companies, while a worrying trend has emerged of fewer companies wanting to list on London’s stock market.
UK capital markets have been described as a ‘backwater’ in the years since the 2016 Brexit referendum, with foreign investors averse to the extra risks and headwinds – and potential lack of reward – on offer in the wake of the country’s departure from the trading bloc.
Yet, while some may be keen to point the finger solely at Brexit, it’s not the only problem. The UK stock market has also developed a reputation as one for more traditional companies, while technology-focussed firms pick the US instead.
While it is not the only impediment to London’s pull when compared to rival markets like New York or Hong Kong, Brexit has weighed on Britain’s attractiveness as a destination to invest or list a business.
Chief economist and head of research at investment bank Panmure Gordon Simon French said: ‘Historically large investors allocated more to the UK than its economy probably justified because it had decent returns, an outsized financial sector and a relatively stable currency.
‘Since 2016, international investors haven’t taken a view on whether Brexit is good or bad, but they see it has created a lot of volatility in sterling and political instability. As a result they reduced their exposure to the UK.
‘If you’re being constructive, you would argue that as the dust settles, political stability improves, some of the costs of Brexit become more obvious, and some of the fears over Brexit don’t get realised, you can start to price the impact on UK companies more appropriately.
‘But at the moment that has been a trickle rather than a flood.’
Author: Mike Sheen, This is Money
Managing Director, Head of Research