London moves to revive its reputation as a financial hub

LONDON – Shein, an online retail giant founded in China, had grand ambitions to go public in New York. But as relations between Washington and Beijing soured, the ultra-fast fashion company began taking a closer look at a backup plan across the Atlantic.

The company is now focusing more on the London Stock Exchange for its initial public offering, according to two people with knowledge of the matter. That may not have been the company’s initial choice – but it would be a big win for Britain, which has been wary of its capital city losing its status as a global financial hub.

Mr Jeremy Hunt, Britain’s top finance official, has reportedly courted Shein, anticipating that

a major IPO

would bolster London’s standing as one of the world’s leading financial centres.

A Shein spokesperson declined to comment; the British Treasury also declined to comment.

By many measures, London is still a crucial financial hub, where prices are fixed each day for precious metals, trillions of dollars of foreign currency are traded and global insurance contracts are written. But the global competition for investors – among cities like New York, Hong Kong, Dubai, United Arab Emirates and Singapore – is intense. Stock listing is a prominent business and a big IPO like Shein’s could be seen as a prize that bolsters the local financial market and sets the stage for other companies to follow.

In an effort to shore up London’s position, British officials are trying to overhaul the financial sector to make the city’s stock market more attractive to modern industries, particularly tech companies, rather than relying on sectors such as banking that historically built London’s financial sector.

London’s reputation for financial services took a hit after Britain’s exit from the European Union, amid concerns that banks would move money and workers to the continent. Some of those fears were overblown, but Brexit has taken a toll. Amsterdam, for example, overtook London as Europe’s largest share trading centre about three years ago, according to Cboe Global Markets.

The emphasis on attracting public listings to London is partly due to pride, said professor of finance Gbenga Ibikunle at the University of Edinburgh Business School.

“London used to be recognised as the centre of the finance world,” he said. “We know that is no longer the case and that has been exacerbated by the fact that we’ve left the EU, and so there is a reduced number of trading, in terms of volumes, in London... that also reduces some of the clout the market has.”

Aside from pride, analysts say, there are good economic reasons to have a healthy pipeline of listings. For one, they support a range of financial and professional service jobs, from bankers to lawyers. Public companies are also open to greater scrutiny, which can give more insight into the state of the economy.

Fears that London is losing its attractiveness for publicly traded businesses have grown over the years, as several companies, including construction materials company CRH and betting operator Flutter Entertainment, shifted their primary listings to New York from London. Others, like oil giant Shell, have acknowledged studying the idea.

Those departing have not been replaced by a wave of companies going public. Last year brought a significant blow as Arm, a British-born computer chip company, listed its shares in New York. That offering, the largest in 2023, raised nearly US$5 billion (US$6.76 billion).

New York has been a long-running destination for IPOs. Many in the financial industry point to concerns that the London market, with less trading volume, leads to lower valuations than the New York exchanges can provide.

There is an advantage to being listed alongside similar companies on the same exchange because the rising tide pulls in more analysts and investors focused on those stocks, said Mr Scott McCubbin, who leads EY’s IPO team in Britain and Ireland.

Part of the problem, analysts say, is that the London Stock Exchange is dominated by companies from older industries, such as banking, mining and oil and gas.

Britain has struggled to attract listings of tech companies and prominent flops have compounded the problem.

Deliveroo, a London-based food delivery company, went public in 2021 and was called “the worst IPO in London’s history”. (Its shares are down 63 per cent from their peak.)

“The rule change that’s going on now is saying we need to make ourselves much more attractive to tech businesses, particularly start-ups, particularly businesses that don’t have a long track record of profitability,” Mr McCubbin said.

It is about companies that build on “what does the next 10 years look like, not what did the last 10 years look like”.

The British government has announced a series of reforms in the past few years to entice companies, particularly tech start-ups, to raise capital through an IPO in London.

For example, Britain reduced the number of shares a company is required to have in public hands to 10 per cent from 25 per cent and allowed certain dual-class listings on the premium segment of the market, changes that are intended to encourage tech founders who might want to retain greater control of their company after an IPO.

Other planned changes are expected to make it easier for companies to make big acquisitions or other transactions without getting shareholder approval.

“We’ve seen a couple of reforms already in place, but the vast bulk are either in flight at the moment or planned but yet to come,” said Ms Julie Shacklady, a director at UK Finance, a trade group. “So we are not really seeing yet the benefit of the totality of the reforms.” NYTIMES