Three more UK-listed companies fell to overseas takeovers on Thursday, continuing a trend that has seen £285bn in market capitalisation leave London since the start of 2023, while only £6bn has arrived via new listings. Bath-based Rotork, a maker of safety valves for pipelines, is being acquired by Swiss group ABB for £4.1bn. Gooch & Housego, a specialist in precision optics for aerospace and defence, is being bought by a US investment firm for £346m. Ramsdens, a financial services and pawnbroker firm, is also being taken over by a US buyer for £230m.
Premiums for Shareholders, but a Bleak Picture for London
Individually, the deals offer significant premiums for shareholders: 73% for Rotork, 41% for Gooch & Housego, and 49% for Ramsdens. Collectively, however, they represent another blow to London’s shrinking stock market. A report by broker Peel Hunt titled Selling the Family Silver highlights the lopsided nature of the trend: since 2023, there have been 154 bids for UK companies with a market value over £100m, totalling £165bn in capitalisation. Additionally, seven large companies moved their primary listings from London—usually to the US—removing another £120bn. In contrast, only 11 new listings of companies worth over £100m have occurred, bringing in just £6bn.
Policy Changes Have Failed to Stem the Tide
Politicians, regulators, and the stock exchange have not been blind to the issue. Numerous consultations, taskforces, and reports have led to policy changes, such as revising UK listing rules to allow founders to retain outsized voting power, similar to US tech companies. However, these minor adjustments have made no difference. The UK market remains wide open to bidders, is underpriced by international standards, and boards face pressure to sell. The US now accounts for about 70% of global stock market value, and liquidity gravitates toward New York, especially for firms under £10bn.
Impact on Capital Flows and Wealth Creation
A stock market is meant to channel capital into wealth-creating assets. Chancellor Rachel Reeves’s Mansion House compacts aimed to boost capital flows, but her definition of “productive assets” skewed heavily toward infrastructure and private assets, largely ignoring public markets. The approach was odd given that boosting “scale-ups” could also occur in a vibrant stock market. Peel Hunt’s head of research, Charles Hall, proposes solutions: a 20%-plus UK weighting in default defined contribution pension schemes, a minimum UK weighting for Isa tax breaks, capital tax reliefs for entrepreneurs listing in London, and removing stamp duty on share trading.
Political Will and Pension System Reforms Needed
Reviving the London market has not been a high priority for Labour leadership contenders. However, Andy Haldane, president of the British Chambers of Commerce and an adviser to Andy Burnham, has called for shifting incentives and tax reliefs to channel more capital into UK firms. He notes that before 1997, the UK’s dividend tax credit regime favoured pension fund investment in UK companies. Haldane argues that the current absence of “home bias” distinguishes the UK pension system from all others worldwide. The hollowing-out of the London stock market is unhealthy, and meaningful change requires politicians to recognise the value of boosting public markets, likely involving pension system reforms.
