City backlash over shake-up of listings rules

Some of Britain’s largest pension schemes have sounded the alarm about planned changes to UK listing rules, claiming they risk making domestic companies ‘less attractive’ for investment.

Ten major pension funds, which together manage around £300bn in assets and include schemes run on behalf of the Church of England and HSBC UK, said in a letter to the Financial Conduct Authority (FCA) that changing listing laws would not lead to “sound capital markets” and would “aggravate” existing difficulties in attracting investment to the city.

Relaxing the rules would make UK listed companies ‘less attractive’ to ‘well-informed long-term investors’, tarnish the UK’s reputation and attractiveness as the world’s ‘quality market’ and its role as a beacon for high corporate governance standards read the letter.

It added: ‘We are responsible for the pension outcomes of millions of UK citizens who work and live in the UK.

We want the UK to continue to thrive as a global financial centre. We don’t think the proposed changes will solve the fundamental problems in our equity markets.”

The warnings come as the FCA and government ministers try to delist the city’s reputation as a destination for businesses.

Proposed changes include removing the need to have audited accounts for three years before listing on the stock exchange, and relaxing rules around dual-class stocks that give company founders more voting power than ordinary investors.

The call for lighter regulation came after an exodus of British companies from London to the US, including computer chip maker Arm, whose owner SoftBank decided to list it on Wall Street despite government lobbying.

In a separate response to the FCA proposals, the Pensions and Lifetime Savings Association (PLSA), which represents schemes that provide retirement income to more than 30 million people, said it believed the changes would “weaken shareholders’ rights” and “damage important checks and balances would be removed.

Policy director Joe Dabrowski said governance standards were not the cause of a drop in new listings.

“The new rules risk backfiring what is hoped for, by potentially narrowing the pool of institutional and private investors willing to invest in UK-listed companies,” he added.

The debate has intensified after Turkish chemical giant WE Soda canceled its IPO, citing “extreme investor caution.”

While many viewed this as a blow to the Square Mile, some argued that the company had issued warning signs and demanded an overvaluation – highlighting that current regulations may have discouraged investors from backing dodgy companies.