How to reboot Britain's capital markets | FT Film

Summary

The video script discusses the challenges facing the UK's financial sector, particularly the shrinking London Stock Exchange and the outflow of tech start-ups to foreign markets like Nasdaq. It highlights the UK's flawed pension system as a core issue, affecting investment in riskier, innovative sectors. The script calls for pension fund revitalization, regulatory changes, and a cultural shift towards risk-taking to foster growth, competitiveness, and the potential for UK companies to become global giants.

Takeaways

• 📉 The London stock market is experiencing a downturn with an outflow of investment, affecting the city's economic vitality.
• 🌐 UK tech start-ups are increasingly drawn to list on the US-based Nasdaq, potentially redirecting returns to foreign investors.
• 💡 A revitalization of the UK economy hinges on pension funds investing in riskier areas to stimulate growth.
• 📊 The London Stock Exchange has seen a significant decline in the number of listed companies and new market entries since 1997.
• 🌍 The UK's shrinking share in global equities is a concern, with the FTSE's growth lagging behind US markets.
• 🏭 The UK market is dominated by 'old economy' sectors like mining and oil, which are less attractive to asset managers compared to 'new economy' sectors like tech and AI.
• 🔄 Large companies, including those in the FTSE 100, are moving their primary listings out of the UK, signaling a need for change.
• 🔄 There is a push for regulatory and rule changes to improve the situation and reposition London as a global financial hub.
• 🏦 The UK's pension system structure and risk-taking culture are specific issues that need addressing to boost the economy.
• 🎓 The UK has a strong start-up scene, especially in biosciences and fintech, but there is a concern about becoming merely an 'incubator economy'.
• 💼 There is a call for a change in perception towards executive pay, especially if it is merited by performance and contributes to company growth.

Q & A

What is the current state of the London stock market according to the transcript?

The London stock market is suffering from an outflow of investment and is shrinking, with the number of companies listed on public exchanges having fallen significantly since 1997.

Why are tech start-ups in the UK being tempted to list on Nasdaq?

Tech start-ups are attracted to list on Nasdaq because it could potentially offer them greater returns, which would go to overseas investors rather than staying within the UK economy.

What is identified as the core problem affecting the UK's economy in the transcript?

The core problem is the UK's flawed pension system, which is not effectively investing in risk areas of the economy, contributing to the decline of the London Stock Exchange.

How has the growth of the FTSE compared to the US market over the last decade?

The growth of the FTSE has been significantly lower than that of the US market. While the FTSE has just reached 8,000, the growth in the US has been much higher during the same period.

What sectors currently dominate the UK markets and why are they problematic?

The UK markets are dominated by old economy sectors like mining and oil, which are not as attractive to asset managers looking for exciting new economy investments such as tech and artificial intelligence.

What is the Edinburgh reforms and why are they significant?

The Edinburgh reforms are a suite of proposals put forward by the chancellor to revitalize the UK economy by changing rules and regulations, aiming to boost the stock exchange and support private company growth.

How do the political parties view the stock exchange and private company growth?

Both the Conservative party and the Labour party see boosting the stock exchange and helping the growth of private companies as a core part of their shared agenda to make the UK economy more competitive internationally.

What is the concern about the UK becoming an 'incubator economy'?

The concern is that the UK may only be successful in creating start-ups but fail to finance and retain these companies in the long term, leading to them being bought by foreign corporations or moving their headquarters outside the UK.

What is the role of the Capital Markets Industry Task Force?

The Capital Markets Industry Task Force was established to bring together people from different parts of the economic ecosystem, particularly to connect those with capital to those who need it, in order to stimulate growth and investment in the UK.

Why is the UK pension system's investment in UK equities considered a problem?

The UK pension system's underinvestment in UK equities is problematic because it results in a lack of domestic funding for UK businesses, leading to a reliance on foreign investment and potentially hindering the growth of the UK economy.

How has the UK's attitude towards risk-taking in investments changed over time?

The UK's attitude towards risk-taking has been negatively impacted by past events such as the collapse of Robert Maxwell's publishing empire, leading to a shift towards safer investments like bonds and away from equities, especially UK equities.