CBI calls for bold action to revitalise UK public equity markets
With domestic capital shifting away from UK equities, new listings having slowed, private equity taking many companies out of the market, and high-growth firms often looking overseas to raise capital, the UK stands at a pivotal moment for the future of its public equity markets.
In a new report, Revitalising UK Public Markets, the CBI sets out a bold roadmap to build on the significant reforms already underway and help ensure the global competitiveness of the London Stock Exchange (LSE). Released ahead of the chancellor’s Mansion House speech on 15th July, the report is designed to ensure public markets can more effectively support investment, growth, and long-term economic resilience.
Public equity markets around the world are undergoing profound structural changes, driven by the rise of private capital, the growth of passive investing, and the dominance of US markets. Despite this, the UK retains real strength and the LSE remains one of the world’s largest and most liquid markets, underpinned by deep pools of capital, global financial expertise, and a trusted legal framework.
Building on the recent reforms to UK Listings Rules, Revitalising UK Public Markets outlines a series of recommendations to ensure the UK remains an attractive place for companies to raise capital and grow, and for retail and institutional investors to participate in the wealth creation that public companies deliver. Developed in partnership with Chairs and leaders from over 30 listed companies, including more than 20 FTSE 100 firms, as well as institutional investors, advisors, and intermediaries, this work reflects a shared interest in a thriving, open, and competitive public market.
Timely, targeted reform can ensure the UK’s public markets once again underpin growth, innovation, and economic resilience.
The CBI proposes four pillars for reform:
1.Developing a new narrative: Develop a new positive narrative for the UK’s capital markets, promoting the role of public equity markets in wealth creation, encouraging retail participation in equity market and pushing forward with reforms.
Recommendations include:
- Rationalise and simplify the burden of annual reporting, including the development of a framework for sustainability reporting which reduces duplicative international reporting requirements.
- Encourage companies listed elsewhere, particularly in Asia, to have secondary listings in London.
- Allow companies to compete for talent outside the UK market.
- Rethink the approach to NED remuneration.
- Strengthen the narrative around the LSE and support better promotion of our capital markets.
- Promote an equity investment culture targeted at retail investors.
2. Improving liquidity and competitiveness: Identify and eliminate policies and practices that discourage equity investment and trading, and address competitive disadvantages relative to other markets.
Recommendations include:
- Encourage the redistribution of DB pension scheme surpluses to scheme sponsors and beneficiaries.
- Consider increasing DC scheme exposure to UK assets.
- Remove or review the application of Stamp Duty and Stamp Duty Reserve Tax, specifically to reduce the extent it disproportionately penalises retail investors.
- Explore ways of encouraging companies to invest for growth rather than focusing on dividends and buybacks.
3.Strengthening the IPO pipeline: Introduce targeted reforms that reduce regulatory disparities between public and private ownership models, including mechanisms to facilitate the return to public markets of companies which have been previously taken private.
Recommendations include:
- Make the costs of initial public offerings tax-deductible.
- Make it easier for private-equity-owned businesses to exit through public markets.
4. Rebalancing stewardship:Adopt regulatory measures that fairly distribute stewardship responsibilities and obligations across all investment approaches.
Recommendations include:
- Ensure holders of more than 1% of a company’s equity engage constructively with a company if they intend to vote against a material Board Resolution.
Rupert Soames OBE, CBI chair: “For the first time, listed companies have come together in a systematic way to the debate on how UK equity markets should be run. Until now, the voice of those who have the biggest stake in the success of the market – the companies who choose to be listed in London – has been barely heard. The CBI aims to help redress that by bringing their perspectives into the conversation alongside government, investors and regulators.
“The LSE remains one of the largest equity markets in the world; following recent regulatory reform it is becoming one of the most attractive to list. But it has seen a far greater loss of domestic liquidity than other markets as investors have allocated their assets away from UK equities into other markets and into bonds; it has also seen a higher level of attrition of membership caused by companies leaving public equity markets and going into private ownership.
“Most of the challenges facing the UK equity markets are common to other markets, including the growth of private capital, the increase in passive investment funds, and investors shifting assets to US markets. The opportunity now is for the UK to build on the work already done to lead the world in finding innovative solutions which will once again make London attractive to companies wishing to raise capital and list their stock, and to retail and institutional investors who wish to participate in the wealth creation owning stocks and shares provide.”
Dame Julia Hoggett, CEO London Stock Exchange:“Our capital markets are an ecosystem. And in a world where we compete globally for capital, the requirements for them to remain competitive calls for all stakeholders – companies, investors, government, regulators, the exchange and other market participants – to work together to ensure our markets continue to provide a globally leading destination to raise capital. It is also vital that as a country we recognise the importance of this for the growth of our economy and with it the improvement in living standards across the country. We welcome the recommendations laid out in this report which reflect the number of parties both impacting, and impacted by, this agenda and the continued partnership required.”
Simon Lowth, chief financial officer, BT Group: “As BT continues to invest into UK infrastructure at the highest rate of any FTSE company, our listing gives all investors the opportunity to benefit from the future returns and cash flow growth from our investment with transparency, liquidity and access to a flow of dividends. We must modernise the stock market to support this critical access to capital and bring real benefits – both to the UK’s businesses and the customers and communities they serve. This is about supporting innovation, long-term investment, and global competitiveness. As the report outlines, with the right reforms in place, the London Stock Exchange can become an unrivalled source of growth capital and returns.”
Matthew Lester, chair, Kier Group: “A vibrant public equity market for UK focused companies is a prerequisite for British companies of all sizes. As part of Kier’s strategic review and the restructuring of our finances, having access to public markets was essential to ensure we had the right capital base to transform our performance. This has protected tens of thousands of jobs, delivered vital infrastructure to the UK and has ensured strong and sustainable returns for our shareholders”.