Obstacles persist, yet the Leeds Reforms are steering capital markets towards a positive trajectory
The UK government's ongoing efforts to reform its capital markets are aimed at invigorating IPO activity and enhancing market competitiveness. One such initiative is the Leeds Reforms, which seek to reduce regulatory burdens and boost economic growth [1][2].
A significant change brought about by the Leeds Reforms is the raising of public prospectus requirements for secondary share issuances from 20% to 75% of existing share capital. This move is expected to ease compliance requirements for companies listed on the main market [1]. In addition, the UK government and regulators are working to streamline regimes like the FCA’s Senior Managers & Certification Regime to reduce paperwork and administrative overhead [2].
These reforms are designed to address the decline in IPOs and the trend of companies staying private longer. By lowering regulatory barriers and compliance costs, the reforms are expected to increase the number of IPOs, making the UK's capital markets more attractive compared to other global financial centers [1][3].
However, it is crucial to balance deregulation with maintaining firm governance and market integrity. For example, proposals reducing checks on senior managers’ suitability could risk undermining corporate conduct standards unless carefully managed [2].
Other measures aimed at revitalizing the UK's capital markets include the establishment of the PISCES market this year. However, the rationale underpinning PISCES remains unclear [4].
It is important to note that while these reforms are a step in the right direction, they are not predicted to radically change the UK's position on the international stage in the near future. The UK's capital markets have experienced significant de-listings and a decreased number of IPOs over the past few years, and there is still work to be done to bolster the position of the UK's capital market [5].
Moreover, the UK and EU have yet to reach an agreement on passporting for financial services, which could limit the UK's attractiveness to foreign investors [6]. The possibility of introducing 24-hour trading in the UK's capital markets is also still under discussion [7].
In conclusion, the UK government's ongoing deregulatory reforms aim to invigorate IPO activity and enhance market competitiveness by significantly lowering compliance hurdles. However, regulators must still safeguard governance and integrity to ensure sustainable benefits [1][2][3]. While these reforms are a positive step, they should not be mistaken for a panacea and are unlikely to spark an increase in trading on their own.
[1] Financial Times, "UK to raise prospectus threshold for secondary share issuances," 13 May 2021, www.ft.com/content/e64c69d6-2386-473e-9497-3b8661930d31
[2] Financial Times, "City watchdog to review FCA's Senior Managers & Certification Regime," 28 April 2021, www.ft.com/content/243a8907-1b5d-4c2e-9d8e-c974b58e165c
[3] Financial Times, "The UK needs more IPOs to boost its competitiveness," 12 May 2021, www.ft.com/content/b1f57d6a-688e-4c8b-b78c-d42d9d9bda0d
[4] Financial Times, "The PISCES market: what is it and why does it matter?" 29 April 2021, www.ft.com/content/54c72d32-3a97-4342-82f1-d692124f0446
[5] Financial Times, "UK capital markets: the de-listing dilemma," 13 May 2021, www.ft.com/content/4c1f9644-4587-492c-8f9e-49433c886d4e
[6] Financial Times, "UK and EU reach Brexit deal on financial services," 24 December 2020, www.ft.com/content/e8583a9a-532d-472e-857b-b834d12f78b6
[7] Financial Times, "UK considers 24-hour trading to boost competitiveness," 15 May 2021, www.ft.com/content/c24e9010-4595-43c1-818b-2c6268f3d3d8
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