London Stock Exchange facing deepening problems

If you thought the old Irish Stock Exchange had problems, spare a thought for its London counterpart.

Euronext Dublin, as the Irish market is now known, may be seeing a slew of big firms drop their listing, but at least it has never been one of the big markets in Europe. The London Stock Exchange, of course, has historically been the most important public market in Europe, if not the world. Now it is facing a crisis of confidence. Company after company is either dropping its London listing or deciding not to list there in the first place. On Wednesday Tui Travel, Europe’s biggest tour operator, said it was considering whether to delist from the London market.

It won’t be the last. FTSE 100 mainstay CRH shifted its main listing to New York and left only a secondary listing in the UK this year, while other index members Smurfit Kappa and Flutter Entertainment are both seen as likely to leave sooner rather than later. Smurfit has already made its intentions clear if a merger with US firm WestRock goes through, while Paddy Power-owner Flutter is shifting more and more towards the US too.

But it’s not just that the London Stock Exchange is losing members, it is also the ones it’s failing to attract. Arm Holdings, a British chipmaker and national champion, decided earlier this year to go public in New York rather than London despite reportedly fierce lobbying by the British government.

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The mood music around the London Stock Exchange is now grim. While there are a number of possible reforms mooted to help arrest the decline – combining smaller pension funds so they would be less conservative and invest heavily in equities, for example, or relaxing rules about how much control a company founder can retain in a listing – the London market is facing a deeper problem.

A generation ago it would nearly have been unthinkable to drop a London listing. Since Brexit numerous European firms have left and prospered, thus removing a critical barrier to firms departing. The London Stock Exchange is now fighting a trend as much as day-to-day issues for its members. It’s a problem that won’t be easily solved.