L&G boss laments “drifting” from the London stock market

The head of one of Britain’s largest insurance companies has denounced the “continuous churn” of companies from the London stock market, arguing that a sluggish economy and political infighting have eroded Britain’s attractiveness.

Last week’s decisions by CRH, the world’s largest building materials group, and British chip designer Arm to shun London in favor of a listing in New York have heightened fears over the health of the UK stock market.

“We should be worried. We are in a constant drift,” Sir Nigel Wilson, chief executive of Legal & General, told the Financial Times. “There is urban exodus to Europe, there is urban exodus to the United States.”

The L&G boss described the UK as “an economy of low productivity, low growth and low wages, riddled with political infighting and that needs to change”. He called for reform of planning and finance rules to reverse the trend, adding: “We need a massive increase in investment in the UK.”

The string of London exits has unsettled UK policymakers and regulators as other companies discuss similar moves, attracted by a larger pool of investors, higher valuations and hundreds of billions of dollars in government spending on infrastructure.

The trend underscores the UK’s difficulties in attracting and retaining businesses, despite government attempts to revitalize the city post-Brexit.

If I go back about 20 years [our defined benefit pension funds] more than 50 percent invested in equities. Now they are about 6 percent

While some officials blamed Arm’s move from London on onerous listing rules from the Financial Conduct Authority, the regulator’s chief said on Wednesday the FCA could not stray far from its rulebook.

“We’re part of the conversation, but there are broader issues as well,” said Nikhil Rathi. He added that the UK tax system is a potential deterrent for companies, along with sterling volatility and pension rules, which have pushed investors out of the UK equity market.

“It’s always disappointing when companies of national importance raise their primary capital elsewhere,” Rathi told MPs.

Wilson, who is stepping down after a decade as L&G boss, also highlighted the decades-long shift in UK pension funds from equities to bonds as a driving force behind the move away from London.

“If I go back about 20 years, [our defined benefit pension funds] more than 50 percent invested in equities. Now they’re about 6 percent,” he said. Defined contribution pension schemes should invest more in high-growth companies, he said.

In its latest attempt to boost the stock market, the government begins a review of the lack of research coverage for UK-listed companies, acknowledging that “concerns about the quality and quantity of investment research produced in the UK in comparison other jurisdictions were voiced — particularly for specific sectors such as technology and life sciences.”

This could undermine valuations and “therefore the attractiveness of the UK as a stock market place and make it more difficult for companies to access private capital,” it said in a statement.

Wilson cited L&G’s efforts to help 600 startups in its portfolio scale. “We want to grow a lot of these and we want them to be part of FTSE for years to come,” he said. “This has to happen in Britain.”