UK financial regulator says listing rules overhaul could lead to more failures

Stay informed with free updates

Simply sign up to the UK financial regulation myFT Digest — delivered directly to your inbox.

The UK’s top financial regulator has set out plans to press ahead with an overhaul of its stock market listings rule book in the latest stage of a drive to encourage companies to float their shares in London. 

In comments echoing those of government ministers, the Financial Conduct Authority suggested the changes could lead to more UK-listed groups collapsing but argued that this was justified in pursuit of more economic activity. 

“The proposals could entail an increased possibility of failures, but the changes set out would better reflect the risk appetite the economy needs to achieve growth,” the FCA said on Tuesday. 

The plans, which include abolishing the distinction between London’s premium and standard listing segments and removing a requirement for shareholders to approve some large transactions or those with “related parties”, are aimed at boosting the UK’s attractiveness to international companies. 

The proposals come against a backdrop of companies dropping their London listings and a dearth of new companies joining the stock exchange amid an extended decline in initial public offerings globally. 

Tui, Europe’s largest tour operator, this month became the latest high-profile company to consider dropping its UK listing, saying it may shift to a single listing in Frankfurt. 

Dublin-based packaging group Smurfit Kappa, building materials group CRH, plumbing supplier Ferguson and miner BHP are among the companies that have decided to leave the FTSE 100 for primary listings in the US or Australia over the past two years.

Gambling company Flutter is preparing a US listing, opening the door for it to follow suit.

The changes, previously proposed in May and now open for consultation until March 2024, are aimed at simplifying London’s listing regime and making it easier for UK companies to compete as bidders for international businesses. 

Current requirements for advance shareholder approval for large transactions left the UK’s premium listed companies at a disadvantage when bidding for assets in competitive sales processes, the FCA said.

The situation “means UK premium listed companies believe they have to pay a premium, agree to high break fees or lose out on competitive opportunities”, the watchdog added. 

Fund managers and investor groups have previously expressed concern that diluting their voting rights would leave them exposed to more risk. 

But the FCA said its proposed “disclosure-based regime” would give investors enough information and enable them to “influence company behaviour and decide how they want to invest”.

Companies would still need shareholder approval before a reverse takeover or delisting their shares.  

The changes are part of a wider series of government-commissioned reviews and moves to pare back regulations in an effort to make the UK more attractive to international companies and investors. 

The planned listing rule changes were published alongside proposals to increase transparency in bond and derivatives markets, including the creation of a “consolidated tape” to give investors a live database of debt market information.