June 14, 2024

London moves to revive its reputation as a financial hub

LONDON – Shein, an online retail giant founded in China, had grand ambitions to go public in New York. But as relations between Washington and Beijing soured, the ultra-fast fashion company began taking a closer look at a backup plan across the Atlantic.

The company is now focusing more on the London Stock Exchange for its initial public offering, according to two people with knowledge of the matter. That may not have been the company’s initial choice – but it would be a big win for Britain, which has been wary of its capital city losing its status as a global financial hub.

Mr Jeremy Hunt, Britain’s top finance official, has reportedly courted Shein, anticipating that a major IPO would bolster London’s standing as one of the world’s leading financial centres.

A Shein spokesperson declined to comment; the British Treasury also declined to comment.

By many measures, London is still a crucial financial hub, where prices are fixed each day for precious metals, trillions of dollars of foreign currency are traded and global insurance contracts are written. But the global competition for investors – among cities like New York, Hong Kong, Dubai, United Arab Emirates and Singapore – is intense. Stock listing is a prominent business and a big IPO like Shein’s could be seen as a prize that bolsters the local financial market and sets the stage for other companies to follow.

In an effort to shore up London’s position, British officials are trying to overhaul the financial sector to make the city’s stock market more attractive to modern industries, particularly tech companies, rather than relying on sectors such as banking that historically built London’s financial sector.

London’s reputation for financial services took a hit after Britain’s exit from the European Union, amid concerns that banks would move money and workers to the continent. Some of those fears were overblown, but Brexit has taken a toll. Amsterdam, for example, overtook London as Europe’s largest share trading centre about three years ago, according to Cboe Global Markets.

The emphasis on attracting public listings to London is partly due to pride, said professor of finance Gbenga Ibikunle at the University of Edinburgh Business School.

“London used to be recognised as the centre of the finance world,” he said. “We know that is no longer the case and that has been exacerbated by the fact that we’ve left the EU, and so there is a reduced number of trading, in terms of volumes, in London… that also reduces some of the clout the market has.”

Aside from pride, analysts say, there are good economic reasons to have a healthy pipeline of listings. For one, they support a range of financial and professional service jobs, from bankers to lawyers. Public companies are also open to greater scrutiny, which can give more insight into the state of the economy.

Fears that London is losing its attractiveness for publicly traded businesses have grown over the years, as several companies, including construction materials company CRH and betting operator Flutter Entertainment, shifted their primary listings to New York from London. Others, like oil giant Shell, have acknowledged studying the idea.

Those departing have not been replaced by a wave of companies going public. Last year brought a significant blow as Arm, a British-born computer chip company, listed its shares in New York. That offering, the largest in 2023, raised nearly US$5 billion (US$6.76 billion).

New York has been a long-running destination for IPOs. Many in the financial industry point to concerns that the London market, with less trading volume, leads to lower valuations than the New York exchanges can provide.

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