[Why&Next] "New York, Get Ready"… UK Aims to Restore Financial Hub Prestige

Former Top 3 Global Exchange LSEG Falls to 9th Place
Due to New IT Firms Like ARM Avoiding London Listing
"UK Finance Minister Persuades 'Shin' to List in London"
Vital Fundraising Through Dual-Class Voting Rights and Cryptocurrency ETNs

Britain has begun efforts to reclaim London's reputation as the world's leading financial hub. Once one of the world's top three stock exchanges, the London Stock Exchange has now shrunk to the ninth largest by market capitalization of listed stocks. In response, the UK government is not only introducing financial deregulation measures but is also extending overtures to Chinese companies, with whom it is embroiled in trade tensions with the United States.

According to a report by The New York Times (NYT) on the 28th (local time), Jeremy Hunt, the UK Chancellor of the Exchequer, met with Donald Tang, chairman of Shein, a major Chinese fast-fashion company, in February to persuade Shein to list on the London Stock Exchange. Shein, which was initially pursuing an IPO on the New York Stock Exchange, is reportedly seeking alternatives as its listing became uncertain due to escalating US-China trade conflicts and forced labor controversies.

[Image source=Reuters Yonhap News]

The UK government has begun revising related regulations to ease financial rules, including reducing the publicly held share ratio required for companies listed on the London Stock Exchange from 25% to 10%, and partially allowing dual-class voting rights. The London Stock Exchange has also approved trading of exchange-traded notes (ETNs) for Bitcoin and Ethereum, opening a channel for global cryptocurrency investment inflows.

The NYT described the UK's moves as "part of efforts to restore London's status as the world's premier financial center." It added, "London remains an important financial hub where precious metal prices are fixed daily, trillions of dollars in foreign currency are traded, and global insurance contracts are written, but global competition has intensified as New York, Hong Kong, and others attract investors." It noted, "A large-scale IPO like Shein's on the London Stock Exchange could serve as a crucial stepping stone to attract additional listings from other companies."

With a history spanning over 200 years, the London Stock Exchange once stood alongside the New York Stock Exchange and Tokyo Stock Exchange as one of the world's top three stock exchanges. However, as New York, Hong Kong, Dubai, and Singapore rose as new financial hubs, London's position began to narrow. According to global market research firm Statista, as of March this year, the London Stock Exchange's market capitalization was $3.4 trillion, ranking ninth among global exchanges. This represents a roughly 20% decline from its peak of $4.3 trillion in 2007. During the same period, the New York Stock Exchange's market capitalization nearly tripled from $19 trillion to $54 trillion.

New York and London also showed differences in capital raising through new listings. Last year, 16 companies listed on the New York Stock Exchange raising a total of $9.5 billion, whereas only 10 companies listed on the London Stock Exchange raised $442.7 million during the same period.

Professor Gwenga Ibikunle of the University of Edinburgh Business School noted, "London was once recognized as the center of the financial world," but added, "Since the UK left the European Union (EU), London's influence and trading volume have declined, and it no longer holds the same status as before." According to a 2021 report by UK think tank New Financial, approximately ?900 billion (about 1,500 trillion won) of global bank assets were relocated from the UK to other countries in the five years following the Brexit decision (2016).

There is also analysis that the London Stock Exchange is dominated by companies in traditional industries such as banking, mining, oil, and gas, which discourages IT companies from going public. In fact, ARM, a semiconductor design company reportedly 90% owned by SoftBank, decided to list on the New York Stock Exchange last year despite being a UK company, dealing a blow to the UK. Even UK-based unlisted AI startups like Synthesia and Stability AI have recently been encouraged to relocate their headquarters overseas after receiving full investment support and tax incentives from foreign sovereign wealth funds.

Scott McCorbin, who leads the UK IPO team at global accounting firm Ernst & Young, said, "Investors and analysts focus their attention on sectors that are on the rise, so companies benefit from listing on exchanges where many similar businesses are present." He diagnosed, "The UK should especially focus on making London an attractive exchange for emerging technology companies."