If you breathed a sigh of relief last year when global heavyweight Shell ultimately decided against leaving London for New York, you might have been premature in discounting the chances of such a cataclysmic departure. If anything, the risk that several of London’s largest listed companies might depart these shores through choice or takeover has risen, not reduced.
As far as Shell goes, 2025 is a critical year. Chief executive Wael Sawan is unhappy with the company’s London discount and a move to New York could put billions onto its valuation. Last year, he said the company would focus first on boosting returns and revamping strategy, with the listing decision likely to be made this year. If the valuation gap with its US listed peers remains, then who knows.
If Shell moves away, that might be the push that Glencore needs, and it could encourage others such as British American Tobacco, under-pressure BP and AstraZeneca too. Rio Tinto is being urged by an activist to leave London, but the company is resisting so far.
Last year’s numbers – 88 departures and 18 new listings – paint a dismal picture, and the first few months of 2025 appear to confirm that London’s stock market remains in the grip of a takeovers and delistings crisis. We don’t even need to speculate about potential leavers because new bids appear every week. Alliance Pharma agreed a takeover last month. Two engineers may be heading for the door: Wood Group has received a fresh bid from Sidara, and Chemring is the subject of a £1.1bn bid, a deal that has been dismissed as too low by Shore Capital. Panmure Liberum expects greater hostility to this offer than was the case when peers Cobham and Ultra Electronics were given up. WPP has been considering a move to New York.
Others, among them Smith & Nephew, Smiths Group, Anglo American and BP, are being encouraged to break themselves up or relist elsewhere. In this environment, the slimmed-down core business would be even more vulnerable to takeover. Several companies have made London their secondary listing. Unilever has chosen Amsterdam as the primary listing venue for its £13bn ice cream spin-off. GlobalData, a company that has gone from strength to strength, has not ruled out going private. Every departure from London reinforces the message to potential newcomers that they shouldn’t list here, which further limits the selection of diverse and interesting growth companies to reinvest in.
Institutional investors have no qualms about the situation. One market is pretty much the same as the next, except that if they can buy shares anywhere but London, they save a fortune in stamp duty. Many retail investors won’t mind either, given investing in US-listed shares is as easy as pie. But there are the downsides: currency risk, paperwork hassle and the menace of withholding taxes in some jurisdictions. Companies that decamp to New York may not pay the level of dividends they once did in London, where payouts are the expectation. And take-privates are completely out of reach.
Despite the significant attrition in numbers in recent years, the London market remains strong. The FTSE keeps hitting new highs (Capital Economics expects it to reach 9,000 this year) driven up by US wobbles, higher energy prices, surging defence spending, hopes of interest rate cuts and of course takeover bids. IPOs may be coming back to life. Peel Hunt expects a much healthier market for flotations this year. But complacency will cost investors, companies and the government dearly the longer it goes on.
Investors need to fight back and think long term. The stock exchange needs to push harder for faster change even though its thriving parent (a broker favourite nowadays) doesn’t care much about its weakest offspring. The government needs to get its thinking straight. The City is a huge contributor to the Treasury and if the market shrinks so does our valuable financial services sector. But if it’s intent on supporting the stock market and growing the economy, why on earth has it undermined Aim small caps by dismantling the full IHT protection for British high-growth companies at a time when they are starved of capital?
On the hotly debated subject of cash Isas, 7IM reminds us that any change on the limit here would be a rolling back of changes, rather than a new policy: up until 2013 cash Isas had a lower limit than the stocks and shares equivalent. As for pensions, the government is only nudging them to support its infrastructure ambitions; it has not requested more investment in domestic shares. Here a clear incentive is required. No mandation is needed – pension funds should never be told where to invest their members’ money – but they should not receive the same tax perks for money invested overseas. It’s domestic holdings that should attract the best tax breaks.