Arm’s New York listing is an example of London’s success being lost to competitors
Cambridge-based chip designer Arm snubbed the London Stock Exchange and listed on Nasdaq. It won’t be the last tech firm we lose unless we learn to encourage continued growth, writes Nicholas Lyons.
The recent decision taken by Arm to list in the US is the latest of a long stream of technology companies to do so. It won’t be the last.
The UK is bursting with creativity and enterprise. This is a great place to start a business. But what happens when these businesses grow? Far too often, they are snapped up by overseas investors. And far too often, when it comes to choosing a place to list, they choose New York or other stock exchanges rather than London. The seed is sown here, but the reward is reaped overseas.
The challenge for all of us in the City is how we stop these cases from becoming part of a larger and damaging pattern. We need to ensure that high-growth companies, such as fintech and other tech firms, do not feel that they need to leave our shores in order to grow.
The UK has the largest number of fintech companies and unicorns in Europe, but often these too are acquired by overseas companies. We need to encourage more home-grown investment for these home-grown success stories, so British people and organisations can benefit from the success of British enterprise.
More must be done to ensure that the UK is the best place not only for high-growth businesses to start, but also for them to scale and to stay. We have a significant opportunity to unlock the resource of UK private and institutional money so that it flows into UK firms. According to the recent report Advancing Purpose by the Purposeful Company, the seven countries with the largest pension fund pots invest on average 19 per cent of their assets in infrastructure and private equity. In the UK, it is just 7 per cent.
One of my key mayoral priorities is to encourage the private sector to plug this funding gap with a £50bn Future Growth Fund. Such a fund would enable investment via private equity into fintech, life sciences, biotech and green technology. By channelling this investment, we can create growth and in turn, jobs and prosperity across the whole UK economy.
Backing for these companies could come from the UK’s existing £4tn pension system which is currently the second largest after the US. I’m aware this will require a shift in risk culture and regulation. The recently announced Edinburgh reforms are encouraging. Enacting the Financial Services and Markets Bill currently in Parliament, and the proposed changes to Solvency II will be a big step forward.
These actions combined with a private fund would present a real opportunity to unleash investment into British businesses, mobilise pension assets, and help us to turn the tide. If everyone had just 5 per cent of their defined contribution pensions allocated to the Future Growth Fund, we would also be giving everyone a share of the success of our growth economy companies.
This is an idea which is gaining traction across the City. The City of London Corporation is convening the industry to discuss how to make the idea of a Future Growth Fund a reality. It is time for us to act decisively and take a new approach. Business follows the money. If we want to keep firms here in the UK, we need to make sure they can get the investment here in the UK. Without it, we will continue to see the exodus of talent, intellectual property and value leaving our shores.