Red lights flashing in City: Chancellor’s British ISA idea plays out as Rome burns, says MAGGIE PAGANO

Last September, David Schwimmer, boss of the London Stock Exchange Group, hit back at mounting criticism that the city was losing its status as one of the world’s leading financial centres.

The ex-CEO of Goldman Sachs described these fears as ‘an exaggerated story and anything seen as negative commentary about London as a financial center has become a kind of clickbait. I think that story is being overplayed.”

How Schwimmer must eat his words today. Or he certainly should be.

In the space of a few days, Britain’s two largest FTSE 100 listed companies, Shell and AstraZeneca, have demonstrated in various ways that the ‘story’ has, if anything, been underexposed. So massive.

The first red flashing light came from Shell. In a stunning admission, CEO Wael Sawan said the oil giant is considering exiting the London market and instead listing in New York as one of several options to boost the group’s valuation.

There was nothing ambiguous about his words. In an interview with Bloomberg, he said, “I have a location that seems clearly undervalued.” You understand why Sawan is so irritated. Shell’s shares trade at a huge discount — or gap, as he calls it — to New York-listed rivals like Exxon Mobil and Chevron, which is why the company continues to buy back its own shares. (Anyone who has money to spare should also invest in Shell).

The second flashpoint came with the sheer scale of the backlash against the pay increase for AstraZeneca CEO Pascal Soriot.

Soriot’s increase went ahead, but over a third of investors voted against the increase to £18 million.

Regardless, it’s a generous pay package, but low by American standards for such a successful business leader.

Soriot has not yet threatened to raise the bar, but there are fears that growing controversy over executive pay levels – and a distinctly British aversion to entrepreneurs and corporate success – will drive companies abroad.

Even Schwimmer has cited compensation as one of the main causes of stock market listing problems. If Britain wants to retain talent, he says, we must copy American-style packages. Interestingly, he hopes to double his salary to £13 million this year. Speaking of talking about your book.

While pay is one factor behind the LSE’s struggles, it is certainly not the most compelling reason why companies like ARM Holdings chose Nasdaq or why Flutter Entertainment crossed the water.

These are well rehearsed, but still nothing radical enough has been done by the government or the regulators to get to the heart of why so many UK listed companies are fundamentally undervalued.

We know the reasons. Institutional investors have no appetite for risk – they own only 4 percent of the stock markets, compared to 46 percent in 1997 – and are encouraged to invest in bonds. Liquidity is low and the cost of capital is high. The rules for duplicate listings have been too strict. Debt is preferred to equity. Stamp duties are also too high. All this has led to the shortage of IPOs – 16 last year compared to 26 the year before. Over the past fifteen years, the Footsie has lagged the S&P 500 in New York by thirteen.

And it will only get worse. Brokers Peel Hunt likened the “relentless” pace of takeover activity to a “feeding frenzy” that could see more than 100 companies exit the stock markets over the next four years.

Goldman Sachs estimates that £5 billion has already been withdrawn from UK share funds this year.

If Shell were to move, it is inevitable that companies such as rival BP and commodities giant Glencore would follow.

One of the main attractions of the London market to date has been the international spread of companies and investors.

Instead of justifying his pay rise, Schwimmer should convene an emergency war cabinet in Paternoster Square this weekend, together with colleagues from the Treasury and the FCA, to come up with radical plans to stop the possible exodus. And if not, we have to ask ourselves why not.

The best thing that Chancellor Jeremy Hunt has come up with is a British ISA.

Not a bad thing per se, but it’s messing around while Rome burns.

He still has a few months left. For starters, stamp duty on share trading should be abolished. Now.