LONDON (CU)_Over the recent years, London’s stock market has been severely criticised amid struggles to attract and retain growth companies which excite investors and build the 21st-century economy that rewards innovation. Currently, technology only makes up about 2 per cent of the market, in stark contrast to 20 per cent across global markets.
Commenting on these figures, the chief economist of Panmure Gordon, Simon French said: “That means London is tenfold underweight in the part of the economy growing faster, and which is attracting high valuations.” “If you’re an investor looking to invest in growth, you haven’t got a lot of options on the UK public market, with the greatest respect to Sage and Micro Focus,” he added.
In an article published on the Financial Times, Paul Marshall, chief of hedge fund Marshall Wace, said the financial centre risked becoming “a sort of Jurassic Park”, since fund managers have failed to encourage and reward innovation and remain content to collect dividends from ponderous old economy players. Echoing these views, the joint manager of Scottish Mortgage Investment Trust, James Anderson, compared FTSE 100 to a 19th-century stock market, heavy with oil stocks and banks and lacking in real innovation.
According to French, although liquidity has doubled in the US market since the financial crisis, it has more than halved on the FTSE All-Share, putting some fund managers off investing in London. “Performance begets liquidity begets performance, so London’s underperformance can lead to a vicious circle,” he noted, adding that “You don’t go from a 19th-century stock exchange, or a Jurassic Park one, to a Star Trek exchange overnight.”
Nevertheless, there are signs suggesting that the City may be embracing change after all. With Oxford Nanopore, Darktrace and Deliveroo coming to market, London has been beaming up some fast-growing companies in 2021. A total of 122 companies were listed on the London stock market last, raising over £16.8 billion (US$22.83 billion), the biggest IPO pot since 2007.
