London Stock Exchange launches taskforce to focus on ‘ultimate purpose’ of capital markets

The London Stock Exchange (LSE) has announced the creation of a new industry group, tasked with improving the competitiveness of the UK capital markets.

The LSE says ‘capital markets are often not discussed in the UK through the lens of their ultimate purpose’, which is to ‘direct capital into the real economy to create the jobs and innovation that have an impact on all our lives, and to help savers, pensioners and policyholders find assets to invest in for life events and their retirement.

‘The UK has a superb start-up ecosystem, with world-leading universities, a unicorn being created on average every 27 days and world-leading fintech and life sciences sectors – among many others. Yet not all of those great companies reach the scale they need or secure financing in the UK.’

Now the exchange has launched a new taskforce, made up of industry leaders from private and public companies as well as investors, academics and more, in a bid to implement recommendations from regulatory reviews including the Kalifa Review of UK Fintech and the Hill Review. But the LSE also says the taskforce will be looking beyond regulation to take a more holistic approach to where further change might be required

‘Taskforce members will convene sub-groups, deliberately drawing from a wide range of industry, academia and civil society, on specific areas where change is needed to ensure an inclusive and thorough debate,’ it says

There has been much criticism in recent years that UK investors are overly focused on dividends, forcing high-growth companies to seek capital elsewhere. Nicholas Lyons, chairman of Phoenix Group and one of the inaugural members of the taskforce, says this is one issue the group will seek to address

‘This new taskforce will play an important role in effecting the change needed to further develop the UK’s thriving ecosystem for high-growth companies, while enabling those investing for the long term, such as pension savers, to benefit from the potential of this important asset class,’ he says in an LSE statement

‘The UK has made enormous progress in becoming one of the best places in the world to found a high-growth company,’ adds Matthew Scullion, CEO and founder of Matillion, and another inaugural member of the taskforce. ‘Recent reforms bring further opportunities to create world-leading companies in high-growth sectors but, if the UK is to create the next Apple or Alphabet, we need an ecosystem that allows companies to be scaled from the UK.

The UK’s Financial Conduct Authority (FCA) noted in a paper published at the end of last year that although 2021 had been ‘positive’, with around 50 admissions to the Main Market between January and October, the London IPO market had been slow to recover after the financial crisis.

The number of listed companies in the UK has fallen by about 40 percent from a recent peak in 2008. Between 2015 and 2020, the UK accounted for only 5 percent of IPOs globally.

Talking to IR Magazine earlier this year, Charlie Walker, who heads up equity and fixed-income primary markets at LSE Group, explained that he is seeing a very pragmatic approach to what needs to be done [in terms of regulation]. ‘These reviews are essentially asking, How do we make sure London is fit for purpose?,’ he said. ‘Just because there are rules that have existed for a long time, it does not necessarily mean they are fit for the future.’