Troubles, they say, come in trebles. If that is so, London is surely braced for more bad news. The financial services industry took two big whacks last week with hopes for London listings dashed by leading firms. First, the Tokyo-based investor SoftBank rejected a London listing for the chip designer ARM in favour for Wall Street in New York. That announcement resonated for several reasons. Before the takeover by SoftBank, the Cambridge-based ARM was traded in London. It is widely recognised as the UK-based supergiant in the chip industry. And it is a trailblazer for the UK that has otherwise taken an evolutionary path away from London’s renowned capital markets. Next came the cement giant CRH, which plans to move its stock market platform to Wall Street too. This decision, in particular, is symbolic of the UK’s position in the global markets: an Irish company that conquered European and American heights, CRH has outgrown the UK pond, so it wants US-based analysts to appreciate how it works. Two really big blows have fallen. These developments entail trouble for the London market as a whole and for the country’s place in the world. Ever since Brexit, the UK has retained its global relevance largely through the financial markets based in London. But announcements such as these hit home about the relevance of the UK in the worldwide system. They also make a difference inside the British economy. Overall, productivity is falling to almost flat. This compares with around 1 per cent growth in other big markets last year. One survey released last week said underperformance had costed the UK economy £54 billion ($65bn) in 2019 alone. A number of bosses in the UK financial system backed Brexit as a reboot for the country. Now, it is true that none of European rivals have stood out from the crowd in the intervening years, but London’s position has not been helped by the inertia in the country’s politics. No new political framework has emerged for the City of London since 2016. This is the worst of both worlds. The strategy pursued by the City chiefs has been to develop themes that showcase the UK. The Lord Mayor of the City of London has been very vocal on big issues such as climate change and Islamic finance. The issue is that the emphasis on these new markets is longstanding. That does not mean there is a clear-cut impact on the City. The actual trophy development that might make this tangible has not yet emerged. The perpetual question hanging over the bigwigs is, what to do about it. One lobby is domestic. There is a push behind something known as “purposeful productivity”. A new report says that just 7 per cent of the UK pension funds market is invested in British-based businesses. If the very large number of UK-based investment managers cannot bring themselves to direct funds into British businesses, there is a diminished prospect for the economy as a whole. It does not help that the lead regulator, the Financial Conduct Authority – better known as FCA – is a sleepy backwater. It has none of the agenda-setting verve of its US peers. Government ministers are in despair and stepping in to shake it up. But that dynamic won’t be sorted out for years. Boris Johnson won the 2019 election based on his determination to rebalance the UK economy. So far, there been little action on that agenda outside the political turmoil that cost him his job last year. The City matters beyond all else in the British economy, yet when it is needed most, it is adrift like the rest of the UK. What the ARM and CRH announcements portend is a kind of one-tier global market. The Biden administration is making its Inflation Reduction Act (IRA) and its Chips Act tools to reshape the global financial system. As John Kerry, the US climate chance tsar, recently remarked, Europe will have to live with it. For company bosses, there is a clear logic in tapping the US market. European initiatives are falling short, and the UK system had not been nimble in defining a role between the two economic blocs. Some blame the multi-stage nature of Brexit, which has involved the reset of the UK’s relationship with Europe. Other views are more hostile across the piece. The truth is that the UK cannot seem to leap beyond its European role. To distinguish itself from what one financier once described to me as a “meat and potatoes menu” of most financial markets is its great role. London is supposed to be the enriched Michelin-starred Leviathan in worldwide finance. The seismic forces of Brexit and the IRA are killing that role. There is still time to make a change, but a trio of killer blows would demonstrate how quickly that privilege is vanishing.
