The financial sector is advocating for a new regulation that would place pressure on British start-ups to reimburse Government subsidies and tax breaks if they opt to list abroad or relocate their headquarters outside of the UK. UK Finance, the banking trade body, underscores the necessity for a “two-way commitment” in relation to subsidies and tax benefits for early-stage companies.
In recent years, the London stock market has encountered challenges as a number of British companies have chosen to list in the US. For example, the computer chip manufacturer Arm, headquartered in Cambridge, made a significant decision to list in New York last year, raising an impressive 54 billion US dollars (£42.3 billion today) in its flotation. This move was perceived as a setback for London, despite substantial efforts to influence the decision made by various prime ministers, including Rishi Sunak.
UK Finance has put forward the idea that British companies should receive an “expanded” range of enterprise management incentives, which encompass tax breaks and subsidies to stimulate entrepreneurship and business growth. However, the trade body suggests that these incentives should be repayable—either in part or in full—should the recipient ultimately decide to list or relocate key operations outside of the UK.
The document, co-authored with the lobbying consultancy Global Counsel, is designed to fortify the London Stock Exchange. It underscores the departure of several companies from the UK markets to list in the US, such as Flutter, CRH, and Ferguson, but also acknowledges the recent success of the computing company Raspberry Pi’s listing on the LSE, which led to a significant increase in its valuation.
Conor Lawlor, the managing director of capital markets and wholesale policy at UK Finance, has expressed the aspiration to witness the prosperity of UK companies while also bolstering the capital markets and the number of companies that opt to list on UK markets. The objective is to position the UK as an attractive destination for companies to list and expand their businesses.
Lawlor has further affirmed, “We have outlined a range of ideas for consideration, including providing enhanced government support to growing companies and also assessing whether that support could incentivise a UK listing. The decision of a UK company to list will always be at the discretion of that particular company.”
The proposed initiative by UK Finance aims to address the growing trend of British companies listing abroad, particularly in the US, and seeks to establish a more favourable environment for companies to list and expand within the UK. It underscores the importance of a reciprocal commitment between the Government, start-ups, and the financial sector to ensure the sustainable growth of the UK’s capital markets and the success of its native businesses.