A former chancellor said London has become a ‘less attractive place to list’ as ministers were urged to speed up market reforms following Arm’s decision to float in the US.
The Cambridge chip designer’s decision to pick Wall Street over the City for its £50billion public offering prompted soul searching in the City and Westminster.
It was described as a ‘kick in the teeth’ by one analyst while Philip Hammond – Chancellor when Arm was sold to Japan’s SoftBank in 2016 – said: ‘London has become a less attractive place to list and that’s largely because of listing criteria and the lack of deep pools of capital in London.’
Julia Hoggett, chief executive of London Stock Exchange, urged ministers to pick up the pace of reform. ‘The announcement demonstrates the need for the UK to make rapid progress in its regulatory and market reform agenda, including addressing the amount of risk capital available to drive growth,’ she said.
‘We are working with regulators, government and wider market participants to ensure UK capital markets provide the best possible funding environment for UK and global companies.’
Cloudy: Arm’s decision to pick Wall Street over the City for its £50billion public offering prompted soul searching in the City and Westminster
Anthony Browne, the South Cambridgeshire MP whose constituency includes Arm’s HQ, said the decision was a ‘big blow’ and voiced fears over jobs and research – though Arm said it was expanding its UK presence and would open a site in Bristol.
The decision to list in New York came as London-listed building materials giant CRH also decided to seek a New York listing.
Rishi Sunak met Arm boss Rene Haas last month to woo the company back to London, where it was listed for 18 years before being snapped up by SoftBank.
Britain’s Financial Conduct Authority was said to be ready to bend rules to persuade Arm, whose technology underpins the global smartphone industry, to return to the UK. But Arm said: ‘Softbank and Arm have determined that pursuing a US-only listing of Arm in 2023 is the best path forward.’
It said it would continue to add jobs in the UK, insisting it was ‘proud of its British heritage’. It also ‘intends to consider a subsequent UK listing in due course’.
The Government said: ‘We continue to attract some of the most innovative and largest companies in the world and note Arm’s commitment to expanding its presence in the UK, providing a boost to growth, jobs and investment.’
But Tory MP Browne said: ‘It is a big blow. The problem with listing overseas is that where the investors are, jobs and research often follows. The Government has tried its best to get Arm listed in the UK but money talks: even the UK government cannot resist the powerful gravitational pull of the US stock markets.’
Victoria Scholar, at Interactive Investor, said: ‘Arm’s abandonment of London is another kick in the teeth for the Square Mile’s attractiveness among international investors.’
Bankers set to miss fees bonanza
Arm’s decision deprives City investment bankers of tens of millions of pounds.
After a threadbare 2022 in the Square Mile and Wall Street a London float would have delivered a fees fillip at a time when global investors remain wary of Britain.
Mark Freebairn, partner at recruitment firm Odgers Berndtson, said companies were being put off floats in London by ‘beyond aggressive’ scrutiny and regulation.
Pearson eyes Wall Street switch
Educational publisher Pearson said it could not rule out a move to Wall Street, raising alarm bells that London could lose another firm.
The FTSE 100 company makes more than 60 per cent of its revenue in the US and has been expanding its courses in North America. Sally Johnson, chief financial officer, said: ‘We don’t have any plans at the moment but where anything makes sense for our stakeholder groups, of course we consider it.’
It came after British chip designer Arm said it will list in New York, and not London. Plumber Ferguson moved its primary listing to New York last year, saying North America was now its natural home.
Pearson said: ‘We’re proud of our FTSE heritage and we’ve got a very supportive and long-standing shareholder base via our listing here in London.’ It said sales climbed 5 per cent to £3.8billion last year, while profits jumped 11pc to £456m, smashing analysts’ expectations.
…but Melrose backs City
Melrose laid out official plans for the bumper £3.9billion float of GKN’s automotive arm in London.
The FTSE 100 turnaround specialist said Dowlais will join the stock market as ‘the UK’s premier listed automotive business’ next month. Melrose, which buys struggling industrial companies, improves them and sells them on, bought GKN for £8.1billion in 2018.
It is splitting off its automotive business, to be called Dowlais, a nod to the Welsh village that was home to one of GKN’s founders.
Dowlais, which has more than 24,000 staff, makes parts for electric and petrol and diesel cars. One in five cars in the UK has parts it makes. RBC Capital markets analysts valued the spin-off at £3.9billion.
Boss Liam Butterworth is in line to make up to £5.3m a year running the business. Melrose will hold on to a 3 per cent stake.