Ministers have to proceed reforming London’s capital markets or threat dropping floor to rival cities within the EU and US, the creator of the UK’s newest market deregulation proposals has warned.
Last week, the Treasury backed a collection of reforms drawn up by Freshfields’ lawyer Mark Austin to make it faster, simpler and cheaper for corporations to lift cash in London.
His six-month assessment advisable guaranteeing that retail traders must be allowed to participate in all fairness raisings, together with these beforehand the protect of institutional traders.
Austin additionally pushed for shares to be held in digital kinds exhibiting their possession to “enhance the ability of individual shareholders to constructively engage with companies on governance and ESG issues”.
In an interview with the Financial Times, Austin described these adjustments as “once in a generation” reforms that alongside work advisable in a earlier assessment carried out by Lord Jonathan Hill will make London as engaging as anyplace exterior the US for corporations to lift cash.
But he added that the UK was prone to complacency at a time when rival cities within the EU have been combating more durable to turn out to be extra engaging to corporations and traders.
“There’s no point having a theoretically perfect market if no one uses it,” he stated.
“By the middle of next year, London will have a regulatory regime that is modernised and fit for purpose. But is that the end of the story in making the market future-proof for the next 20 years? Absolutely not. We’ve got much wider issues.”
Austin argues that the UK must turn out to be extra “streetwise”, and tackle an “insurgent” mentality moderately than merely counting on its historical past as a monetary capital.
“When we were in the EU, we were the default place for western capital. We’re not necessarily any more. We should justify everything by reference to whether we still need it, and what use it serves. Because I think if you asked that question across a lot of our listing regime, you don’t actually need it.”
As a company lawyer, Austin creates “grids” of execs and cons for purchasers for various cities when assessing the place to record. “Until now, we haven’t come out that well, the amount of friction we have.”
While ministers have been fast to say the advantages of having the ability to reform exterior the EU, Austin is evident that almost all of those adjustments may have occurred no matter Brexit. In some circumstances, reforms have been wanted merely to meet up with regimes in cities comparable to Amsterdam.
“The air is in danger of going out of London. It was never going to be a cliff edge after Brexit. If we’re not careful, we will go back to being a regional financial centre. I think we should be more ambitious than that.”
Last Tuesday, the Treasury revealed the outcomes of a assessment of the fundraising market by the Freshfields’ lawyer, which recommends reforms to the pre-emption rights regime to permit extra money to be raised shortly, and to cut back regulatory oversight of fundraisings.
It is hoped the reforms will make the UK’s capital markets extra engaging for fast-growing and capital-hungry companies, they usually have obtained assist from fund managers comparable to Abrdn, BlackRock, Hargreaves Lansdown and Jupiter.
Austin says the London itemizing regime has been overburdened by further necessities and laws, and “gold plating” of primary guidelines. He argues that there are vested pursuits and a “groupthink” mentality that assist the established order of the UK capital markets. “Just because that’s the way we do it now doesn’t mean we should keep it going forward — you’ve got to keep London relevant.”
Cities comparable to Paris, Frankfurt and Amsterdam “don’t have any of this baggage”, he added. “London needs to wake up right now. And start to really motor in terms of meaningful, sensible, bold and brave reform.”
Companies are nonetheless deterred by excessive taxes and company governance that limits remuneration for high executives, he stated. “You can’t reward people in the way you can in other jurisdictions. My worry is that we’re making it too unattractive for companies to be public here.”
Austin added that proposed adjustments to company governance guidelines in forthcoming laws would add additional burdens on corporations trying to record within the UK, and predicted that extra public corporations could be taken personal, the place guidelines have been looser.
He stated that investor attitudes additionally wanted to alter round backing promising progress corporations, moderately than merely searching for earnings via dividend-paying shares.
