London market shares concerns as stock levels diminish

Is the recent trend of companies leaving the London Stock Exchange (LSE) a short-term blip or a symptom of the long-term decline in the global status of the market? What are the principal reasons driving the exodus of companies and what are the implications going forward for the UK financial sector?

Last year, the LSE experienced its largest outflow of companies since the global financial crisis of 2008, with 88 companies delisting with many transferring their primary listing to other markets, most noticeably New York. Departing household names that have ditched the LSE include Just Eat, Flutter, Tui, and Ashtead. Furthermore, rumour has it that Astra Zeneca is the latest star name considering a London delisting. The principal reasons cited by companies leaving the LSE include declining market liquidity, lower company valuations, and the administrative burden, complexity and costs associated with a listing in London, which compares unfavourably to the deeper, more liquid (and less bureaucratic) markets in the US.

However, other commentators have countered that talk of LSE's demise is exaggerated, as over half the reported delistings in 2024 resulted from mergers and acquisitions, rather than migration to other stock exchanges. Delisting is often an attractive option as it gives management more control to expand or restructure a business or take it into private ownership and control. Private equity has the benefit of less regulatory constraints and greater operational freedom.

In addition, 18 companies listed on the LSE in the same period raised approximately £3.4 billion, which represented a more than 250% increase over 2023. Experts also argue that the decline in listings on the LSE merely reflects a global trend, with other capital markets suffering similar falls because of tighter regulation, most noticeably in China.

What is the outlook for the LSE going forward and what steps have the authorities taken to address the delisting issue? The UK stock market faces significant challenges due to company outflows, competitive global markets, and regulatory burdens, including taxes. Although efforts are being made to reform and revitalise the London market, such as tapping the so-called pension “megafunds” being promoted by the government, more ambitious measures including reform of the Listing Rules may be necessary to replenish stock levels and restore London’s declining status as a leading financial centre.