213. The Decline And Fall Of The London Stock Exchange

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1:25Robert Peston:Queen Carvania stood haloed by the morning sun. An army hung on her every word.

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2:05Robert Peston:Hello and welcome to The Rest Is Money with me, Robert Peston.

2:09Steph McGovern:And me, Steph McGovern. Robert, it's been a terrible week, hasn't it? And I know, obviously, given the attack on the synagogue in Manchester and several people being injured and two people dying. I mean, how do you feel? This is just horrendous, isn't it?

2:29Robert Peston:When I heard about the murders of the two people at the Manchester synagogue, I burst into tears. Obviously, subsequently, when we learned that one of them was when we were certainly killed by the police officer who was trying to, well, was shooting the killer. That just sort of adds another dimension of sort of horror to the whole thing. The big thing that keeps haunting me is, you know, all the questions around the nature of anti-Semitism in this country. I was on the night of the murders. I was on ITV News at 10 from Downing Street and was doing my best to be calm and, you know, not come across as too emotional.

3:34Robert Peston:because it's definitely not what viewers want. But the question I pose there is really around the sort of nature of this very pernicious anti-Semitism that is increasingly prevalent, not only in the UK, but actually in America and Canada, all over Europe. And one thing it is important to point out is there has been a massive increase, not only in manifestations of anti-Semitism in the form of sort of vandalism and hate speech, but also, you know, violence all across the world against Jews has been rising. This is a, you know, seriously worrying phenomenon. Now, lots of people understandably tie it to the actions of the Netanyahu government in Gaza.

4:32Robert Peston:The thing that I said on the news, which seems to me to be something everybody should think about, is that Putin has been responsible for the most brutal and appalling invasion of Ukraine, the killing of not only Ukrainian soldiers, but very large numbers of civilians, children, women, has there been an outbreak of anti-Russian sentiment, you know, violence against people of Russian origin or Russian emigre around the world? No, I mean, there just hasn't been, right? And yet, so if anybody's wondering whether or not, you know, what we're seeing is just straightforward anti-Semitism, of course it's anti-Semitism, Because, you know, Jews are being held to a completely different standard in this particular instance, Russians.

5:32Robert Peston:And, I mean, look, I take the view, as it happens, you know, I have been consistently critical of what Netanyahu and the Israeli government are doing in Gaza. but that doesn't make me a sort of a good Jew as opposed to those Jews who happen to be supportive of Netanyahu. You know, you should not be in a country like the UK made to feel anxious and vulnerable just because of your, you know, ethnicity and religious beliefs. And that applies as much to Jews as to Muslims as to brown people and black people. And, you know, as I say, it's real, this anti-Semitism, and it's deeply troubling.

6:20Steph McGovern:Yeah, yeah, yeah. I know, because, I mean, every time I walk past a synagogue or a Jewish school, I am always shocked that there has to be security outside, you know, that presence of, you know, there's danger. And it's just, what world are we living in where schools have to have security outside. It's absolutely shocking. And I know, Robert, you yourself have had people verbally saying stuff to you, haven't you, in the street and things. And I know, obviously, it's very different to the severity of this attack. But you yourself are seeing this personally too, aren't you?

6:57Robert Peston:Yeah, two or three weeks ago,

7:03Robert Peston:myself and a couple of others were subjected to very unpleasant abuse in a local restaurant. I don't really want to go over that because I don't want to give particular attention to the horrible person who was behaving in that way. But look, we're living through an era where there is so much hate, so much sectarianism in general. It's not all about anti-Semitism. There's tons of other ethnic groups subject to appalling prejudice. So it's not all about Jews. But even though I'm not a particularly religious Jew, being Jewish is a huge part of my identity. I didn't choose it. If you have a Jewish mother, you are deemed to be Jewish, as it happens I've got.

7:57Robert Peston:Both of my parents are Jewish. I grew up being told that neither of my parents knew of any non-Jews in our family, even though neither of my parents were particularly religious. I also grew up in, you know, in the 60s and 70s, which still felt like the shadow of the Second World War. And so when you grow up knowing that if you'd been in Germany at the time, you'd have gone to the gas chambers. All of this is a part of my, our identity. But truthfully, although I did experience anti-Semitism, casual anti-Semitism, often from very posh people in this country growing up, I didn't grow up particularly fearful as a Jew.

8:46Robert Peston:and I'm still desperate not to walk the streets in fear or be fearful. But I do understand why so many Jews do feel genuinely anxious and fearful. And we've somehow got to recreate a more tolerant society so that people don't feel at risk just because of their beliefs or who their parents were. Just to lighten the mood for a second, just in case it's amusing. you. So I did do one of those ancestry DNA tests about a year ago, and I discovered I am 98.5 % Ashkenazi Jew, and there's 1.5%, which is Scandinavian, it says. So I'm really fascinated. I'm fascinated by when and how. I mean, it may just be that these were Scandinavian Jews, and they haven't quite found a way to recognise it in the ancestry screening.

9:46Robert Peston:But I like the idea that somewhere back in the midst of time, you know, one of my ancestors, you know, got off with had a child with some tall blonde from Scandinavia. Unfortunately, the tall blonde genes don't seem to be passed to me. But there we go.

10:03Steph McGovern:There's a whole other programme to be done on that, isn't there?

10:06Robert Peston:Somebody needs to exactly help me trace my Viking ancestor.

10:08Steph McGovern:Shall we move on then and just look at what's going on in the business world then? Because there is, again, as always is the case at the minute, loads to talk about. We talk a lot on this programme about why we struggle as a country to encourage companies to list on the stock market here, why some of them are delisting, moving their main listings to other countries like America. we talk a lot about the lack of investment in uk companies so so we've got some news around that

10:39Robert Peston:some figures on it as you say it is absolutely fascinating and and i was struck by two things um but you i mean it'd be great if you could just fill in the big picture but the two things i was struck by was that companies apparently in in the last year or so raised more money on the angola stock exchange than they raised on the London stock exchange, which is sort of astonishing. And then secondly, the implications of AstraZeneca, our second biggest company, getting a full listing in America. The implications of that are really very significant. And I'm going to come back to that. But if you could just give us the big picture, Steph, that'd be great.

11:18Steph McGovern:Yeah, I think one of the most significant things is that London has now dropped out of the world's top IPO markets. And what we mean by that is, in other words, it's not in the top 20 places now where a company would choose to list their company when it comes to raising money by selling shares. So we've now fallen out of the top 20 in terms of where that's happening. We've been taken over by places like Mexico and Singapore, not places that automatically going to spring to mind when you're thinking about top you know places to sell shares and and then looking you know you mentioned that about Angola and they seem to be raising more money than we are if you look at the figures of how many companies have actually last year only 18 companies completed their IPOs that is the lowest we've ever had half of them as well we are on the alternative investment market so you know which is the one targeted at smaller companies and then even looking at this year the first half of 2025 only 160 million pounds has been raised in London IPOs which is the weakest half we've had in something like 30 years so on the one hand you've got the companies who are choosing not to list here and do it in other places but also you've then got the companies leaving so 88 companies have delisted or transferred away from the LSE and that's the highest exit we've seen since the 2009 financial crisis.

12:55Steph McGovern:So that's 88 companies who delisted or transferred last year. Most of them, unsurprisingly, have moved their listing to the US. And, you know, we've mentioned some of the biggies in the past. You've got Flutter, for example, which is the betting company that owns Paddy Power. You've got Wise listed with great fanfare just a couple of years ago in 2021 they raised just shy of you know a valuation of 90 billion pounds then but they have now moved to them and listen to america because they think that will appeal more to us investors you've got the ferguson the plumbing supplier company ashtead construction equipment rental group and again you might not have heard of some of these names but they are big companies contributing a lot or were contributing a lot to the uk economy and then some of them have cancelled that were meant to happen as well we've talked a lot about she and that's not happened yet here and doesn't look like it's going to so there's a lot happening which doesn't look good for us as a country when it comes to be being the place where people can raise money for their companies by selling chairs on the stock market here and that has lots of implications as you you know alluded to earlier robert so astrazeneca as i say the second biggest

14:07Robert Peston:company in the UK, regarded as a great British life sciences success story, run by a bloke called Pascal Solio, who is French, a rather charismatic chief executive. They claim that they're keeping their primary listing in the UK, right? While listing their shares on the New York Stock Exchange, listing their shares in America. But there is a, there's quite an interesting sleight of hand going on here. And it's a sleight of hand that if you were the Chancellor of the Exchequer right now, or if you are Rachel Reeves, you should be quite worried about. Because at the same time as going for a full listing in America and dropping their original trading arrangements over there via a sort of form of sort of security called an American depository receipt, an ADR, they are changing the nature of their listing in the UK.

15:13Robert Peston:so that what will be traded in the UK are British depository receipts, not full proper shares. This is clear from a document they sent to shareholders. Now, the reason why this matters is because these new sort of fangled versions of the fair, the depository receipts in the UK, when you trade them, you won't have to pay stamp duty. And there was an article in the FT that says talking to tax specialists, they believe that this therefore this listing in America and the conversion of what's traded in the UK to these depositing receipts will cost the exchequer up to 200 million pounds a year in stamp duty.

16:07Robert Peston:The UK is one of the few stock exchanges of any size where stamp duty on share transactions is still charged. It raises just over three billion pounds a year for the exchequer. Pretty much all my professional life, investors and companies have argued that stamp duty should be abolished in the UK to make the London Stock Exchange more competitive. It hasn't ever been abolished. But the sort of wheeze that AstraZeneca is employing, that looks to me as a serious undermining of the tax. There will immediately be now, as a result of the lead taken by AstraZeneca, lots of other companies will now be seeing whether they should follow AstraZeneca's lead, go for a full listing in America and move to these depository receipts in the UK.

17:01Robert Peston:OK, so, you know, there is a very real risk for the exchequer that stamp duty will wither on the vine as more companies move their full listing to America and adopt the structure that AstraZeneca has shown seems to be legally OK. and just ahead of a budget even though 3 billion is it's not an enormous sum of money you know the fact that another 3 billion is at risk is not the kind of thing that the Chancellor would want to hear there is an argument that says that she should just bite the bullet make the London Stock Exchange more competitive and abolish stamp duty the problem is politically that she would struggle to do that because she'd have to find that 3 billion from some other tax.

17:50Robert Peston:Basically, most people will say, by abolishing stamp duty, you're just rewarding rich investors, not realising that, of course, those rich investors are actually, in many cases, the kind of pension funds that are providing pensions to millions of British people. And therefore, abolishing stamp duty could be very directly good for millions of British people saving for their pensions. But that's not how it would be seen. So I can't see the Chancellor abolishing stamp duty, even though I personally take the view that would be a very good thing to do.

18:21Steph McGovern:Would it work from an optics point of view? Because I totally agree that if you got rid of stamp duty on shares, people would very much think that that's, you know, the wealthy getting a tax break. but what if you got rid of stamp duty completely because we've talked a lot about the problems across the whole system in terms of housing and everything else what if you got rid of stamp duty so the optics were everyone's going to benefit from getting rid of stamp duty and instead announce some other tax things that then you can you know close that I guess loophole to circumvent it so it doesn't look like it's a free reign for rich people and it i don't know it just feels like everything stamp duty is one of those ones we should just bin off so i certainly completely

19:10Robert Peston:agree with you steph that any rational chancellor would not only get rid of stamp duty on shares but the much higher rates of stamp duty on property transactions it uh is really bad for the mobility of people in the country you don't want a tax that discourages people from moving it's crazy the problem and it would be wholly rational to move from a system where you get taxed on transactions the current system to where everybody pays a certain percentage of the value of their property to the government every year um and we've mentioned before that there is quite a rational plan for that that was proposed by this bloke tim leaning the problem is that in the short term and in the short term, we mean two or three years, that reform costs the Treasury quite a large sum of money because what you couldn't do, you know, if you move tomorrow and paid some enormous amount in stamp duty, it would be unfair at that point immediately to start charging you, you know, a couple of percent a year on the value of your property.

20:16Robert Peston:And so any reform of that sort, you could only levy the property tax on people who don't pay haven't paid the stamp duty and therefore it takes years to build up the revenue from that property tax and in the intervening period you're just losing all those billions from from stamp duty so it's because of the you know the black hole in the budget it just prevents the chancellor from actually going ahead with what would be in normal circumstances, very sensible reforms.

20:51Steph McGovern:But as you said, that black hole is only going to get bigger if companies like AstraZeneca are moving their main share listings to other countries. Because as you rightly said, there is an economic point here about why we need them to be listed here.

21:07Robert Peston:I mean, the fundamental problem with the fact that you've got a stock exchange where people don't want to list, they don't want to raise new capital, where the valuations on that stock market, even though the London stock market has had a pretty good run in the last few months, still relative to the values of other, you know, the valuations that are put on companies of other stock markets, you know, the valuations put on British companies or British-listed companies are relatively low. You know, as you say, many British people may say, oh, well, that just means that a bunch of rich people aren't going to be as rich as they were.

21:41Robert Peston:That's got nothing to do with all of us. Well, it has got a lot to do with all of us because a vibrant, economy requires businesses to not only be created here, and we do have this vibrant business creation sector in the high tech world, but just everywhere. We're pretty good at creating businesses. We've talked before about one of the great failures of this country is the absence of so-called scale-up capital. So that is the capital you need to get to the kind of size where you can expand internationally, you can take on more employees. It's not necessarily getting you to the size where you want to list on a stock market, but it's that sort of stage of development just before that.

22:29Robert Peston:So we haven't got enough of the scale-up capital. That is a problem. But also, let's just say we fix the scale-up problem, right? And you have more medium-sized companies, and they are looking for, you've got your slime business, presumably one day, obviously many years from now, when slime is a global multinational leader, you'll think to yourself, oh, I'd like to cash in a bit. I'd like to take some money out, right? Totally, totally. Historically, the point of listing on the stock exchange was not so that you could cash in your entire stake immediately, but it gave you confidence that as and when you wanted to sell shares, you could do so.

23:07Robert Peston:If you were thinking of borrowing money for some other project, you could prove the value of what you created. So that was one of the great reasons why the stock exchange was good not only for individual companies, but for the economy as a whole. because it meant that though your business, Slime, would remain, even as it became a global giant, would remain British listed, British registered, head office here, and it was just great for Britain. The problem with the relatively low values of companies on the Stock Exchange is if, you know, Steph McGovern and her Slime business are now thinking about cashing in and trying to get a market, it, you know, you're much more likely to go to, you know, to go for an American listing, where valuations are way higher.

24:02Robert Peston:And over time, that almost certainly means that you'll be tempted to have more of your operations over there, you'll buy more of your legal services over there, just in general, quite a lot of value that would otherwise come to UK based people and businesses would go to America as a result of that American listing. And who knows, one day, Stepma Govan herself might just decide to move. How much poorer would the UK be if Stepma Govan moves to other New York or San Francisco? That would be an absolute disaster for us all. And so I'm just trying to illustrate through this micro example, as it were, why when you have an underperforming stock market, as we do and have had for years, actually, it doesn't just matter to the rich people in the economy.

24:49Robert Peston:It matters to everybody because it does have a depressing effect on employment creation here, wealth creation here that affects millions and millions of people. So it's not a trivial problem, the decline in the success of the London Stock Exchange. But the fundamental reason why the London Stock Exchange has performed so badly is because compared to almost all our competitive nations, we do not have big pools of capital big pools of money here that want to invest here in the UK in the London stock exchange we have these pension funds but what do they do they buy UK government debt gilts they they invest in America they invest almost in it almost did anything other than what we call British risk assets.

25:42Robert Peston:And yes, the government has taken some steps to try and persuade British institutions to invest more in the UK. But, you know, they're nowhere near having actually, you know, created the right kind of incentives so that our money, our pension fund money our savings money gets more invested here we you know the solution is in our own hands right we've got these massive pools of capital in the uk but they will not