New leadership and the economic crisis present an opportunity to make the UK a more attractive listing location

As a high growth tech business, a question OakNorth Bank / OakNorth is often asked is where would we list if we were to go public? While we have no current plans to list, the location is something I’ve frequently discussed with numerous other tech CEOs and co-founders. Some have listed in the UK, others in the US, and there are many who are still considering their options.  

London is having a tough time convincing tech companies to list here – as evidenced most recently by Cambridge-based tech group, Arm Holdings. According to recent research from EY, global IPO activity is down 41% year-on-year amidst ongoing market turmoil and inflationary pressures, but the numbers are particularly high in London which has seen a drop of 76%.  

The main challenges we’ve identified are that while the UK offers lower costs and lower securities litigation, as well as more certain price discovery, the US market has much more depth and liquidity and, crucially, the growth investors that the UK is lacking. In fact, we’ve only been able to generate a few true growth investors in the UK public markets, including asset managers such as Baillie Gifford.  

Our new Prime Minister, Rishi Sunak, has made consistently clear his ambitions to make London a first-choice listing location for high-growth tech businesses: in 2020, he tasked Lord Hill with carrying out an independent review of the UK’s listing arrangements. In September 2021, he hosted Treasury Connect to meet with tech leaders and discuss their needs, and a month later, announced the UK Secondary Capital Raising Review. Meanwhile, the FCA announced a series of listings rule changes to boost growth and innovation in UK stock markets. Its move to allow firms to freely float 10% of their share capital when they go public on the LSE compared with the previous 25%, was definitely a step in the right direction. As was its decision to allow a 'targeted form' of dual-class share structure within premium listing segments, which gives company founders more control over major decisions. But we need to go further. 

If the UK government and policymakers want to encourage more tech companies to list here, they need to get the growth investors to the UK to understand the strength of the tech ecosystem first hand and meet some of the most promising high-growth tech companies that could list in the future. Secondly, policymakers could consider setting up a specific study into what factors are driving the "price multiple" premiums in the US and find ways to import that to the UK. Thirdly, they could look at how to make the first couple of years less onerous for new IPOs, so that businesses can ease into life as a public company.  

The UK has so much to offer: we have world-class research universities (four of the world’s top 10 universities are here); forward-thinking regulators with an open approach to innovation; a strong framework of common law and a common language; and a timezone that allows true global operations across EMEA, APAC, and the Americas. The result is that the UK has created more tech unicorns than any other country, bar the US and China, and is a world leader in terms of attracting investment. We are, as International Trade Secretary Kemi Badenoch put it recently “Europe’s unicorn capital” and it’s vital that growth investors see this. London is particularly unique being home to a global finance centre (including the London Stock Exchange), a tech centre, and a policy / regulatory centre all within a few tube stops of one another, making it an exceptional place for innovative companies to be born and thrive.  

With new leadership in Number 10, an economic downturn which means fewer companies are listing in the short term, and hundreds of billions of dollars being wiped off the market caps of US-listed tech businesses, there is an opportunity for the country to take stock and see what can be done to make London more attractive for growth investors. If policymakers can get this right, the tech companies will inevitably follow. The City must seize this opportunity to attract more tech IPOs and establish a stronger growth investor base.