Complacent or cautious? City grandees divided on Government’s Square Mile cheerleading

City grandees are divided about the pace and scope of the government’s reforms to capital markets, as pressure grows to boost the UK’s financial hub quickly.

Responding to growing concerns around the state of London’s capital markets, the government has launched a slew of reviews designed to reinvigorate the City.

City minister Andrew Griffith claimed yesterday that the government’s reform efforts were “bearing fruit” argued the UK’s financial services industry was a “jewel in Britain’s crown that even the doomsters cannot deny”.

But some City grandees are not convinced with the speed or scope of the reforms.

Charles Hall, head of research at Peel Hunt told City A.M. that the government recognises the need for further action, but argued “this has to be more than just regulation”.

“London’s equity markets provide a vital role in providing long-term capital for growing companies, but it is patently clear that the UK is losing ground and losing companies,” he said.

Hall welcomed the government’s focus on reform, but said the speed was “pedestrian” and warned little would be achieved ahead of an election.

Similarly, Simon Morris, financial services partner at law firm CMS, cautioned that the City’s position was “under threat on many fronts, each of which calls for urgent attention”.

Morris pointed out that Brexit has made the UK less attractive while London has lost new business to New York. He also argued UK regulators can be “needlessly slow and difficult when handling applications”.

He said that these issues demand “innovative thinking” from the government. “Hopefully the minister has packed them in his holiday bag for further reflection.”

The City has faced a bruising few months. A number of firms – most prominently the semiconductor firm Arm – have abandoned the capital for listings in other cities around the world. Onerous rules have also been blamed in part for the loss of some of the most high profile IPOs.

The problems are more long standing though, with figures from the UK Listing Review show that listings in the UK have reduced by 40 per cent since 2008.

In response the government has launched a slew of reviews to reinvigorate the City’s capital markets. These include changes to the listing regime and attempts to direct funds from British pension funds into domestic start-ups.

But some City grandees praised Griffith’s efforts.

James Ashton, chief executive of the Quoted Companies Alliance, told City A.M. that Griffith was an “energetic proponent of reform”.

Mark Austin, author of a major review of the UK’s capital markets, argued “the reform agenda is fully underway and the right legal and regulatory reforms are either in place or are in flight.” 

“We now just need to stop the doom loop and shift market practice – including in relation to governance and stewardship – and market perception back to a positive narrative that emphasises all the inbuilt advantages that the UK already has,” Austin said.