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London — The biggest collective owners of UK shares have warned the London Stock Exchange against weakening its listing rules and governance standards to help attract fresh business, a letter to its chair seen by Reuters showed.

Britain’s Local Authority Pension Fund Forum (LAPFF), which represents £350bn ($441.74bn) of UK local authority pensions, said it was “very concerned” about the efforts of an industry task force led by London Stock Exchange plc CEO Julia Hoggett.

That group, the Capital Markets Industry Taskforce (CMIT), opposed efforts to strengthen the UK’s corporate governance code, with many of the reforms ultimately ditched in January as the government focuses on making the UK more competitive.

The group has also lobbied to allow companies to raise CEO pay to attract global talent to Britain. David Schwimmer, CEO of London Stock Exchange plc’s parent LSEG, is in line for a potential doubling of his salary compared with 2023.

The Financial Conduct Authority is due to finalise a radical shake-up of listing rules in coming weeks.

“The main message coming from the CMIT is that the UK has been losing listings, primarily to the USA, because of overly onerous rules in the UK and that relaxing the Listing Regime is a solution to that,” the letter sent on Tuesday to LSE Group chair Don Robert from LAPFF chair Doug McMurdo said.

“We are concerned that the positions being taken by CMIT are neither evidence based nor balanced, and some positions have little credibility in basic terms,” the letter said, noting a lack of representation of asset owners on the CMIT, as opposed to “fee takers” such as asset managers.

LSEG declined to immediately comment on the letter. CMIT did not immediately respond to a request for comment.

Pension funds have already raised concerns over weaker listing rules. Railpen and nine other UK pension schemes which oversee £300bn ($379bn) warned the FCA last June against a proposal they saw as diluting shareholder rights.

Construction materials company CRH and online sports betting firm Flutter Entertainment are among companies to have exited London for New York. UK chip designer ARM also chose to list in New York, despite the efforts of the UK government.

Some post-Brexit financial reforms proposed by government and widely backed by the sector were in the pipeline before CMIT was launched in July 2022.

Fifty-six of the LAPFF’s 87 members hold LSE Group stock representing just under 1.5% of the total share capital, making them a top-15 investor according to LSEG data.

McMurdo noted that the trend of fewer companies listing was not a UK-specific issue, with the number of US public companies also shrinking over time. Also, both Shell and Unilever had favoured the UK over Holland when ditching their dual listings, he said.

A number of companies had also left the public markets due to insolvency, including because of poor auditing, such as Northern Rock and Carillion.

Given that, McMurdo reaffirmed the LAPFF’s view that governance standards and the UK listing regime needed to be strong to protect both investor interests and the UK economy.

“In lobbying to lower the governance and listing regime the LSE not only risks loss of its reputation, but also ‘poisoning the well’, making the UK an unfavourable place to allocate capital.

“We therefore ask LSEG to make public any evidence it has regarding any link between the listing rules resulting in fewer listings or less investment.”

Thomson Reuters, owner of Reuters News, holds a minority stake in LSEG, which pays Reuters for news.


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