Money managers and market players are split on whether recommendations to amend U.K. listing rules are a good idea from a governance point of view and the right way to attract more capital to London.
The U.K. Listings Review, published last month and chaired by Lord Jonathan Hill, was launched by the U.K. chancellor of the exchequer in November to ensure the U.K. could stand up to "stiff competition as a financial centre" from the U.S., Asia and elsewhere in Europe, a document of the review said. Mr. Hill is a former European Commissioner, financial stability, financial services and Capital Markets Union.
One of the suggestions is to introduce dual-class share structures to U.K. "premium" listings — companies that have the potential to be included in the FTSE 100 and FTSE 250 — moving away from the one share, one vote model of what sources said was a "gold standard" among global markets.
"At a high level, there's this real tension," said Ashley Hamilton Claxton, London-based head of responsible investment at Royal London Asset Management. "We're big advocates of good governance … (but) there's this tension about being able to attract capital to list in London" — particularly technology businesses that tend to go to the U.S. or Hong Kong where there might be lower listing standards, she said.
Under dual-class structures, a company will typically have two classes of shares — one with the right to one vote per share, while the other has a high or "super" vote, usually carrying 10 or 20 votes per share.
In the U.K., premium-listed companies are prevented by the Financial Conduct Authority's principles from offering shares with differently weighted votes.
The FCA now needs to consult on any changes it might make to listings rules — including other proposals such as removing a barrier that deters special purpose acquisition companies from listing in the U.K. — based on the recommendations.
While the debate over amending U.K. listings rules has popped up over the years, the review is particularly relevant now: Between 2015 and 2020, London accounted for only 5% of initial public offerings globally.
"We need to get the balance right. London does need to attract capital, but needs to maintain good governance standards," Ms. Hamilton Claxton said.