Capital markets in the Gulf are fast emerging as "key partners" for London's financial services companies, UK economic secretary and City minister, Bim Afolami, told a summit.
"That's why last year we agreed with the kingdom of Saudi Arabia to collaborate on financial services, including capital markets, which will harness the dynamism to maximise the full potential of UK-sourced capital and finance in the kingdom," he said.
Mr Afolami was speaking at the beginning of City Week, a four-summit, two-day event in London at the Guildhall with discussions ranging from capital markets, to green regulations and investment and the role of AI in financial services.
This year's events come in the same week that UK inflation is predicted to fall below the Bank of England's target following a series of inflation-busting interest rate rises in the years after the global Covid pandemic and the energy crisis sparked by Russia's invasion of Ukraine.
Noting that through the economic and social change of the past few years the UK has remained "a global financial centre, with London at the heart of its success", Mr Afolami said Britain and the world is at an inflection point that the ancient Greeks referred to as "kairos moments – moments in time when things can change".
British Prime Minister Rishi Sunak predicted last week that more will change in the next five years than in the past 30, which Mr Afolami said was "why for the British financial services sector everything has had to change for our success to be maintained".
"Promises and words of politicians are not enough," he added.
"We have to deliver. That's why we are completely rewriting the UK's prospectus regime to make it easier for companies to list and raise capital on UK markets."
Over-regulation
Despite this, some analysts claim London's financial markets are over-regulated and swamped with rules and red tape, making some enterprises think twice before making the markets of the Square Mile the home for their listed shares.
But Sarah Pritchard, executive director at the Financial Conduct Authority (FCA), countered such claims by pointing out that "confidence in the market is essential and that confidence is underpinned by a clear regulatory regime".
"Input from the market as we design our future-facing rules is key to avoiding unintended consequences, or worse, taking a hammer to crack a nut," she told the City Week Capital Markets summit.
Meanwhile, addressing the issue of raising capital on the London market, the London Stock Exchange's (LSE) chief executive, Julia Hoggett, told the City Week summit that "the competitive environment for capital markets has changed radically over the last 30 years with vibrant, enlarged domestic-focused capital markets growing in China, India and the Middle East, where previously such activity would have gone more to the UK or the US".
"London has raised double the amount of capital to date than the next European exchange and in terms of total size, London's market cap is also £1.9 trillion more than the next European exchange."
'Erroneous assumptions'
Ms Hoggett also commented on the recent focus on companies delisting from the LSE, either being taken private or opting to seek fortune in the deeper capital markets in New York.
"The pressure for companies to go private is in no way a uniquely British phenomenon," she said referring to JP Morgan Chase chief executive Jamie Dimon's recent letter to his company shareholders, which noted the 41 per cent decline in publicly listed companies in the US over the past 30 years.
"Given how consequential this discussion is for the future of our economy, and for the companies listed on or coming to our market and to investors in our markets. we need to make sure that we don't allow erroneous assumptions that become entrenched in how we talk about our capital markets," Ms Hoggett added.
Some of those "erroneous assumptions" were dispelled by new analysis from Bloomberg which showed that despite a dip in the number of initial public offerings (IPOs), London remains Europe’s top venue for sales of shares in listed companies in terms of secondary deals.
So far this year, London has seen $11.3 billion worth of such share deals, a jump of almost 24 per cent on the same period last year, which is a lot higher than other comparable European exchanges.
“We are well ahead of the other markets that we are often contrasted with, be it Amsterdam, be it Frankfurt,” said Dru Danford, head of investment banking at the stockbroker Liberum. “London outperforms all those European competitors.”
As such, Ms Hoggett believes the "entrepreneurship that goes on in listed companies everyday" in the UK needs to be noted, "celebrated" and not "taken for granted".
"The companies listed on our markets as well as the companies coming to our markets do remarkable things, yet often the average person on the street knows more about Tesla and Amazon than they do about the companies listed on our markets or considering coming to our markets."
