Almost 200 guests from the small and mid-cap community attended to find out more about what we need to do, as well as what is being done, to enable thriving public markets in the UK.
This year, we brought together the key figures involved in stock market reform - government ministers and regulators – together with companies, their advisers and investors.
It was a chance to pause for breath, meet new contacts, refresh old ones and collectively ask: What work is in train? What more needs to be done to set London on a firm footing for the future versus other capital markets centres? What is the political mood music?
And, away from the slew of incoming regulation and new legislation, how to change the narrative so that the Main Market, AIM and Aquis are regarded as the de facto place for founders to bring their businesses when they want to access capital to grow?
For those who missed the event, our Chief Executive, James Ashton comments on the 5 key takeaways from the day:
1 Challenges remain, but political consensus to sharpen London’s competitiveness gives grounds for optimism
It can’t just have been because the sun was shining. Or that CAB Payments, a cross-border payments provider, had announced that morning it would float on the Main Market.
Even among some of the most sceptical company advisers in attendance, there were grounds for optimism. That came firstly from the political consensus that fixing our capital markets will greatly contribute to fixing the UK’s growth problem.
Andrew Griffith, Economic Secretary to the Treasury, said that public equity was “top of the tree”. There are differences between both sides, but Labour, represented by Griffith’s shadow, Tulip Siddiq, appears to be on the same page as the government, saying that her party would “de-risk investments and make it easier for liquidity providers to invest in the high growth firms of the future”.
Secondly, delegates were enthused to hear the full package of measures currently being worked towards - including the FCA’s recent proposed overhaul of the listings regime – and left thinking there was substance there to move the dial favourably. That’s just as well because, as Rothschild’s Richard Wyatt pointed out, London has more to lose than most.
The QCA’s role is ensuring that words become deeds, that new rules are proportionate and pro-growth - and that so many work streams come together in a cohesive whole.
2 Public and private markets need not be adversaries
Private markets are here to stay, according to the London Stock Exchange CEO, Julia Hoggett. They are not just an interest rate play. That means it’s vital to iron out the cliff edge that exists for founders considering going from private to public. The LSE hopes that’s where its “intermittent trading venue”, a quasi-public market for private companies, comes in.
There is still upside to going public. One of the reasons Sara Murray, the founder of AIM-listed Big Technologies, praised life as a public company was because she didn’t need to spend so much of her time trying to raise fresh backing. And that meant more time focused on actually building her business.
We know there are many more founders like Sara, and will continue to inform the narrative that public markets are the ideal place to raise capital, operate transparently and distribute wealth widely.
3 London’s equity research problem could be solved by a surprise source
Rachel Kent, the Hogan Lovells lawyer tasked with producing a Treasury review into reviving the volume and value of equity research, made a strong connection between a company’s coverage and its liquidity. But even if there is agreement that more research is better, what hasn’t been agreed is who will pay for it in the future.
Julia Hoggett was reluctant to take up the QCA’s suggestion that the LSE should step in to fund research itself. However, the exchange could yet take a role here. We will keep pressing, and highlighting international examples where exchanges have stepped in to stimulate equity research, therefore boosting liquidity.
4 Audit costs are only going one way – up
The quality gap in the audit market is continuing to widen, according to the Financial Reporting Council’s deputy CEO Sarah Rapson, with the larger firms leaving behind the mid-tier and smaller.
It sounds as though there will be little respite for companies who have endured soaring audit costs lately. The FRC tracks standards not prices, leaving auditors to run themselves as they see fit, but Rapson admitted that when joint audits are eventually introduced, capacity in the market is expected to tighten further.
It’s a problem for our members that we have raised with government. Reliable audits aid investment decisions, but at what cost to the company if fees are rocketing and risk aversion dominates?
5 Retail investors are welcome back, but who knows how companies will communicate with them?
Politicians from both sides are eager to revive the UK’s share-buying culture. Griffith would welcome back Sid, star of the 1980s British Gas privatisation advertisement. Siddiq recognised how retail investors play a role in boosting liquidity.
However, our final conference panel fell out over how best to engage small shareholders. Archie Norman, the Marks & Spencer chairman, told how he chaired a recent AGM with a single shareholder in the room, hence his eagerness for companies to be allowed to switch their meetings to digital-only, so more people can get involved, more conveniently. But Sheryl Cuisia of The Engagement Appeal said the AGM needed re-imagining to draw in a younger crowd.
Broadening participation comes first. That means greater public education about share owning, with Lord Lee of Trafford urging TV producers to create new shows to excite the next generation of retail investor.
We know how important small investors have become for small stocks. We need investor platforms to enable better, low-cost shareholder communications.