CBI Proposes Reforms to Revitalize London Stock Market Amidst Decline

In a recent report, the Confederation of British Industry (CBI) has outlined a 20-point plan aimed at revitalizing the London Stock Exchange (LSE), which has seen a significant decline in listings and capital inflow. The CBI warns that without immediate government and regulatory reforms, the London stock market risks 'drifting into irrelevance'. This statement was made public on July 9, 2025, as the LSE faces increasing competition from foreign markets, particularly in Asia and the United States.

The CBI report emphasizes the urgent need for financial incentives, such as tax breaks on stock market listings, as well as modifications to executive compensation structures. According to the report, these changes are essential to attract new listings and ensure the growth of existing companies. 'With domestic capital shifting away from UK equities and high-growth firms increasingly looking overseas to raise capital, the UK stands at a pivotal moment for the future of its public equity markets,' the CBI stated in their publication, 'Revitalizing UK Public Markets'.

Specifically, the CBI suggests that tax deductibility for initial public offering (IPO) expenses could significantly enhance the attractiveness of the London market. 'IPOs are time-consuming, costly, and uncertain. The lack of tax deductibility for IPO expenses reduces the net proceeds retained by companies and may deter listings,' the report elaborates.

This call for reform comes on the heels of reports that Pascal Soriot, CEO of AstraZeneca, has considered relocating the company's stock market listing to the United States, highlighting a broader trend of UK firms contemplating overseas options. As noted in the CBI report, the uncertainty surrounding U.S. policies under former President Donald Trump presents a unique opportunity for London to position itself as a viable alternative for foreign companies seeking secondary listings. 'Many Asian markets are growing faster than the UK, but this presents an opportunity. London can offer companies in these regions a complementary venue for additional listings,' the report asserts.

The forthcoming Mansion House speech by Chancellor Rachel Reeves is anticipated to address some of these issues, with expectations of proposed reforms to individual savings accounts (ISAs), pension investments, and further deregulation in the City of London. The CBI recommends that corporate governance structures also require reassessment, particularly regarding bonus rules for nonexecutive directors. Currently, these individuals are prohibited from receiving performance-related pay to maintain independence, a restriction the CBI argues may inadvertently foster a risk-averse culture within boardrooms.

Rupert Soames, chair of the CBI, emphasized the importance of addressing the common challenges facing UK equity markets, which include the growth of private capital and the shift towards passive investment funds. 'The opportunity now is for the UK to build on the work already done to lead the world in finding innovative solutions that will once again make London attractive to companies wishing to raise capital,' he stated. The CBI's proposals are based on feedback from leaders of over 30 listed companies, including FTSE 100 firms, as well as major investment houses and advisors.

In conclusion, the CBI's recommendations highlight the critical need for reforms within the London Stock Exchange to address ongoing challenges and ensure its competitiveness in the global market. With increasing pressure from foreign exchanges and shifting investor preferences, the future of the LSE may depend on the swift implementation of these proposed changes, marking a potential turning point for the UK's financial landscape.