London Aims to Reclaim Its Status as a Financial Centre

Initially planning to go public in New York, the Chinese online retail giant, Shein, has shifted its focus towards the London Stock Exchange, following the escalating tensions between the US and China. This move could prove advantageous for Britain, where concerns have been raised about the possibility of London losing its stature as a significant global financial hub.

Two informed sources revealed that Shein is considering the London Stock Exchange for its initial public offering (IPO), which might not have been the company’s initial plan. Jeremy Hunt, Britain’s leading finance official, has apparently been courting Shein, expecting that a major IPO might reinforce London’s position as one of the leading global financial hubs. Both Shein and the British Treasury have declined to comment on the matter.

The Importance of London as a Central Financial Hub

London continues to be a vital financial hub, handling precious metals’ daily pricing, trillions of dollars of foreign commerce, and global insurance contracts. However, the growing competition from other global cities such as New York, Hong Kong, Dubai, and Singapore is considerable. A prominent business like stock listing and an IPO on the scale of Shein could act as a lucrative prize that supports the local financial market and sets a precedent for other companies.

Revitalising London’s Financial Sector

In an attempt to consolidate London’s standing, British authorities are trying to revamp the financial sector to make the city’s stock market more alluring to contemporary industries, particularly technology firms. This effort is a move away from sectors like banking, which has traditionally been the foundation of London’s financial sector.

The reputation of London for financial services took a hit post-Brexit due to concerns about banks moving their funds and personnel to the continent. Although some of these concerns have proven to be exaggerated, Brexit has indeed caused some damage. For instance, Amsterdam surpassed London as the biggest share-trading center in Europe three years ago, as revealed by Cboe Capital Markets.

Motivations for Encouraging More Public Listings in London

According to Professor Gbenga Ibikunle of the University of Edinburgh Business School, one of the reasons for promoting public listings in London is national pride. Renowned as the finance world’s heart, London has seen a decrease in its trading volume post-Brexit, which has adversely affected its market influence.

Aside from pride, there are economic benefits to having a robust lineup of listings. These listings support a variety of jobs in financial and professional services, including bankers and lawyers. More public companies also mean greater scrutiny, providing deeper insight into the economy’s current state. Over the years, there have been growing concerns about London losing its attraction for publicly traded businesses as several companies have shifted their primary listings to New York from London.

The lower trading volume of the London market is a cause of concern for many in the financial industry, as it often leads to lower evaluations than what the New York exchanges can potentially offer. As a result, New York has been a long-standing destination for IPOs.

Encouraging Tech Start-Ups to London’s Stock Exchange

Part of the issue, according to analysts, is that the London Stock Exchange is primarily dominated by companies from antiquated industries such as banking, mining, as well as oil and gas. Tech companies often overlook Britain for their listings, a situation that has been compounded by some high-profile failures. An example is Deliveroo, a London-based food delivery company whose IPO in 2021 was termed as “the worst IPO in London’s history,” with its shares having declined by 63% from their peak.

The British government is attempting to revise its regulations to entice more tech start-ups for raising their capital through an IPO in London. Some of the changes include reducing the number of shares that a company must have in public hands from 25% to 10% and allowing certain dual-class listings on the market’s premium segment. These changes are intended to encourage tech founders to maintain more control of their company post-IPO.

Looming Transparency Concerns for Shein

In the case of Shein, the company has cited the need for greater transparency concerning allegations of subpar labor and environmental practices as one of the reasons for going public. The London Stock Exchange is known for its high standards of companies, applying strict reporting requirements and new sustainability rules.

In addition to Shein, dealmakers and proponents of the London market highlight other optimistic news for the British exchange. Raspberry Pi, a manufacturer of affordable computers, has announced its plan to go public on the London Stock Exchange. Furthermore, corporate advisers suggest that an array of companies owned by private equity firms might enter the London exchange starting next year.

As many companies deliberate over whether to list in New York or London, Mr. Hunt and Bim Afolami, a Treasury minister, met with tech companies this month to promote Britain as a location for raising capital.

Afolami expressed positivity for the future at a recent London event, saying, “For a couple of years we’ve beat ourselves up, but actually this year we are very optimistic that we’ve really turned a corner.”