The London stock market is facing a critical period of decline, with a noticeable surge in UK-listed companies being acquired by foreign entities and a significant lack of new firms choosing to list in the capital. Last Thursday alone highlighted this trend, as three prominent UK businesses became targets for takeover bids, collectively valued at over £4.6 billion.
Bath-based Rotork, a manufacturer of safety valves for pipelines, is set to be acquired by Swiss group ABB for £4.1 billion. In a separate deal, Gooch & Housego, a specialist in precision optics for aerospace and defence, is being bought by a US investment firm for £346 million. Additionally, Ramsdens, a financial services and pawnbroker firm, is also being taken over by a US entity for £230 million. While these deals offer substantial premiums for the selling shareholders, they collectively underscore a worrying pattern for the broader UK market.
A recent report by broker Peel Hunt, titled 'Selling the Family Silver', sheds light on the stark imbalance. Since the beginning of 2023, there have been 154 takeover bids for UK companies with a market value exceeding £100 million, amounting to £165 billion in stock market capitalisation. Furthermore, seven large companies have moved their primary listings away from London, mostly to the US, accounting for another £120 billion in capitalisation. In stark contrast, only 11 new listings of companies worth over £100 million have occurred in London during the same period, representing a mere £6 billion in combined capitalisation. This equates to £285 billion departing the market versus just £6 billion entering it.
Despite various consultations and policy adjustments, including changes to UK listing rules to allow founders greater voting power, these measures have largely failed to stem the tide. Experts argue the UK market is currently undervalued compared to international benchmarks, making its companies ripe for acquisition. The global dominance of the US market, which accounts for approximately 70% of worldwide stock market value, also draws liquidity towards New York, particularly for firms below the £10 billion valuation.
The implications for the UK economy are significant. A robust stock market is crucial for channelling capital into wealth-creating assets and supporting the growth of businesses, including 'scale-ups' – a stated ambition of the Treasury. Current government initiatives, such as Rachel Reeves's Mansion House compacts, have focused heavily on infrastructure and privately owned assets, with public markets receiving less attention. This has led to calls for the incoming Chancellor to make revitalising the London stock market a priority, exploring measures such as increased UK weighting in pension schemes and ISA tax breaks, along with capital tax reliefs for entrepreneurs listing in London.