The British banking sector has called for the next government to penalise startups that take state aid and then list abroad amid concerns about young companies choosing foreign stock exchanges over London.
UK Finance suggested subsidies and tax breaks could be clawed back, arguing in a paper published this week that companies in receipt of government help should have “a two-way commitment”.
British businesspeople and City grandees have said for several years that London’s stock market is in decline relative to other exchanges, notably in the US, where some fast-growing companies have said it is easier to attract investments.
Recent departures from the London Stock Exchange have included the building materials company CRH, the betting company Flutter and the plumbing products company Ferguson. Perhaps most galling for the LSE, however, was the failure to attract the huge flotation of the Cambridge-based chip designer Arm, which plumped for New York despite the personal lobbying of Rishi Sunak.
In a paper co-written by Global Counsel, the lobbying consultancy set up by the former Labour business minister Peter Mandelson, UK Finance suggested commitments to stay in the UK in exchange for government support could help to arrest the movement of companies abroad.
“The government should also consider ways in which an expanded set of taxpayer-funded supports for early-stage growth companies involve a two-way commitment and would become repayable in part or full if a recipient ultimately chooses to list, or move valuable operations, outside the UK,” it wrote.
“Where a UK company chooses to join public markets or locate is a choice for the company. However, there is a strong case for linking taxpayer supports to future commitments to using UK public markets and operating in the UK.”
Regulators, politicians and executives have prescribed various remedies for the perceived exodus. The Financial Conduct Authority last year unveiled sweeping reforms to make it easier for startup founders to keep controlling stakes, apeing the US.
The chief executive of the LSE, Julia Hoggett, argued last year that UK companies were not on a “level playing field” because British asset managers tended to vote against larger, US-style pay packages.
Conor Lawlor, the managing director for capital markets and wholesale policy at UK Finance, said: “We want to see UK companies grow and be hugely successful. We also want to bolster our capital markets and the number of companies that choose to list on UK markets. Our aim is to make the UK as attractive a destination as possible.
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“We have set out a range of ideas for discussion, including giving enhanced government support to growing companies, and also looking at whether that support could incentivise a UK listing. Where a UK company chooses to list will of course always be a choice for that individual company.”
The banking body also suggested tapering early-stage government support for startups, rather than cutting it off abruptly when they reach a certain size, and said there could be benefits to making it easier for pension funds to invest in unlisted UK companies.
There were 2,101 companies listed on London’s main market in 2003, but that figure has fallen to 1,022, according to LSE data.
