A former chancellor said London had become a “less attractive place to be on the list” as ministers were urged to speed up market reforms following Arm’s decision to float to the US.
The Cambridge chip designer’s decision to choose Wall Street over the City for its £50bn public offering sparked a soul-searching in the City and Westminster.
It was described by one analyst as a ‘kick in the teeth’, while Philip Hammond – Chancellor when Arm was sold to Japan’s SoftBank in 2016 – said: ‘London has become a less attractive place to go public and that’s because largely due to the listing criteria and the lack of deep capital pools in London.’
Julia Hoggett, CEO of London Stock Exchange, urged ministers to step up the pace of reform. “The announcement shows that the UK needs to make rapid progress with its regulatory and market reform agenda, including addressing the amount of venture capital available to drive growth,” she said.
“We are working with regulators, government and wider market participants to ensure UK capital markets provide the best possible financing environment for UK and international companies.”
Overcast: Arm’s decision to choose Wall Street over the city for its £50bn public offering sparked a soul-searching in the city and Westminster
Anthony Browne, the South Cambridgeshire MP whose constituency includes Arm’s headquarters, said the decision was a “major blow” and expressed fears for jobs and research – although Arm said it was expanding its UK presence and would add a site in Bristol to open.
The decision to go public in New York came when London-listed building materials giant CRH also decided to go public in New York.
Rishi Sunak met Arm boss Rene Haas last month to bring the company back to London, where it was listed on the stock exchange for 18 years before being picked up by SoftBank.
Britain’s Financial Conduct Authority is said to be ready to bend rules to persuade Arm, whose technology powers the global smartphone industry, to return to the UK. But Arm said, “Softbank and Arm have determined that pursuing a US-only listing of Arm by 2023 is the best way forward.”
It said it would continue to add jobs in the UK, stressing that it was “proud of its British heritage”. It also “intends to consider a subsequent listing in the UK in due course”.
The government said: ‘We continue to attract some of the most innovative and largest companies in the world and take note of Arm’s commitment to expanding its presence in the UK, boosting growth, jobs and investment.’
But Tory MP Browne said: ‘It’s a big blow. The problem with listing abroad is that where the investors are, jobs and research often follow. The government has done its best to get Arm listed on the UK stock exchange, but money talks: not even the UK government can resist the strong pull of the US stock markets.’
Victoria Scholar, at Interactive Investor, said: ‘Arm’s exit from London is another kick in the teeth for the appeal of the Square Mile among international investors.’
Bankers miss out on fees
Arm’s decision deprives City investment bankers of tens of millions of pounds.
After a worn-out 2022 in the Square Mile and Wall Street, a London float would have paid off at a time when global investors remain wary of Britain.
Mark Freebairn, a partner at recruitment firm Odgers Berndtson, said businesses in London were being put off by ‘more than aggressive’ scrutiny and regulation.
Pearson looks at Wall Street’s switch
Education publisher Pearson said it couldn’t rule out a move to Wall Street, raising alarm bells that London could lose another business.
The FTSE 100 company makes more than 60 percent of its sales in the US and is expanding its courses in North America. Sally Johnson, chief financial officer, said: “We have no plans at this time, but if something makes sense for our stakeholder groups, we will of course consider it.”
It came after British chip designer Arm said it will appear in New York, not London. Plumber Ferguson moved his main listing to New York last year, saying North America was now his natural home.
Pearson said: ‘We are proud of our FTSE heritage and we have a very supportive and long-standing shareholder base through our listing here in London.’ It said revenue rose 5 percent to £3.8 billion last year, while profits rose 11 percent to £456 million, beating analysts’ expectations.
…but Melrose supports City
Melrose unveiled official plans for the £3.9 billion bumper of GKN’s London car arm.
The FTSE 100 turnaround specialist said Dowlais will enter the stock market next month as “the UK’s leading publicly traded automotive company”. Melrose, which buys, improves and resells troubled industrial companies, bought GKN in 2018 for £8.1 billion.
It is splitting off its car business, which will be called Dowlais, a nod to the village in Wales where one of GKN’s founders lived.
Dowlais, with more than 24,000 employees, makes parts for electric, petrol and diesel cars. One in five cars in the UK has parts it makes. RBC Capital Markets analysts estimate the spin-off at £3.9 billion.
Boss Liam Butterworth is poised to earn up to £5.3 million from running the company. Melrose retains a 3 percent stake.
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