Bennett on Business: London listings and the Bank’s bitter Pill
Neil Bennett discusses London’s IPO problem, the Bank’s chief economist and more in his fortnightly City A.M. column
IT is amazing what people can do in an emergency. For years, the London equity market has been the victim of benign neglect and over-zealous regulation. From a time when it was the global equity market of choice in the noughties, it has become a backwater.
This has been the case for years yet no-one thought to do very much about it. Then suddenly Softbank announced that it would float ARM in New York not in London and – finally – the Powers That Be woke up to the fact we had a problem. ARM is one of those few symbolic businesses that Ministers and MPs have heard of, so the ‘something must be done’ cry went up.
The result, in double quick time, was the consultation document issued by the FCA earlier this month that proposes to roll back two decades of the red tape and ‘Computer Says No’ that we have saddled ourselves with.
For once the FCA has produced something that I can’t fault. Nikhil Rathi, the FCA’s CEO, appears to have grasped the concept that equity is risk capital, helped no doubt by Andrew Griffith the City Minister, whose time at Rothschild and then as Sky’s CFO make him unusually well qualified for a ministerial post. My only hope is that they get a move on and enact these changes swiftly, because the real risk is that they get watered down and then lost in the morass of next year’s General Election.
However sensible they are, they only address once side of the equation – the supply side. Let’s assume that an expectant queue of potential IPO candidates is already forming, ready for these changes to take effect. They still need people to buy their shares and the fact is that Britain’s equity culture has been woefully eroded in recent years, thanks in part to the pressure from the PRA for pension funds to increase their weighting in ‘safe’ bonds instead. So the demand side still needs urgently addressing and so far the response on that front has been…limited.
As a result, many quoted UK companies are saddled with low, low share prices and it is no wonder that some are considering relisting overseas. One crumb of comfort is that at least takeover premiums have risen, according to a banker friend of mine. In the past a bidder would generally succeed if they offered 30 per cent over the market price. Today they need to offer a premium of at least 50 per cent to begin serious talks.
Stop taking the…
WHEN I predicted a couple of months ago that Huw Pill, the Bank of England’s Chief Economist, would be a headline writer’s dream, I had no idea how right I would be – the ‘Bitter Pill’ mastheads have been appearing everywhere – with no copyright sadly.
What I didn’t expect is what a headline news grabber he would turn out to be – for all the wrong reasons. His comment on a podcast last month that we ‘all need to accept we are worse off’, had shades of Marie Antoinette about it. He was upbraided by his boss Andrew Bailey and has now admitted he ‘regrets’ saying it.
I have no doubt that Pill is a brilliant economist, who dazzled at Goldman Sachs. But the role of Chief Economist at the Bank is more about nuance and diplomacy than headline grabbing – remember the Governor’s eyebrows? On that front Mr Pill still has a way to travel.
Can I quote you on that?
UK consumers may be proving a bit flaky, but appetites are still strong for pasties and sausage rolls
Susannah Streeter from Hargreaves Lansdown shows she knows how to craft a soundbite when discussing Greggs’ trading.
Made in Chelsea
Next Monday sees the annual corporate blowout that is the Chelsea Flower Show Gala Preview Evening, when the goodest and greatest bask against a backdrop of horticultural miracles. The heads of half the FTSE100 turn up and along with them all the most powerful dealmakers and advisers.
As a keen gardener, I am however perturbed that the RHS is now demanding that we stop calling them weeds and refer to them instead as ‘resilient plants’ or ‘weed heroes’. These are clearly people who have never had to hack back a bramble thicket or seen their rose beds invaded by thistles. Next they’ll be calling slugs and aphids ‘plant champions’.
Let’s face it, weeds are weeds and the crowds at Chelsea do not come to admire dandelions.
A must-see for new arrivals
We had a discussion in the office the other day on the best film about banking and finance. There were quite a few votes for The Big Short inevitably and one or two soft headed suggestions of Wall Street (the original of course)
But the runaway winner was Margin Call. Not only does it have an amazing cast of Kevin Spacey, Demi Moore and a terrifying Jeremy Irons as the bank’s boss, but it is by far the closest thing to real life in banking when things go wrong. I have met versions of every character in the film and been in sweaty meeting rooms and trading floors just like them. If you haven’t seen it watch it, and if you have, watch it again. Now required viewing for all H/Advisors new arrivals.
Neil Bennett is global co-CEO of advisory and comms firm H/Advisors
