Is London burning? Take a look at the headlines about the stock market exodus, and you might think the answer is ‘yes’. Eighty-eight companies left the London market or moved their primary listing elsewhere last year, and more than 70 have done the same so far in 2025.
There were 28 cancellations on the main market and 42 on the junior market in the first five months of the year to 31 May, according to investment platform AJ Bell. We have seen a wave of further announcements since.
In the first half of June, semiconductor group Alphawave agreed to a £1.8 billion takeover from US tech giant Qualcomm; university start-up Oxford Ionics agreed to be acquired by US quantum computing company IonQ as part of a $1.1 billion deal (£0.8 billion); and industrial technology company Spectris received a £3.7 billion takeover proposal from private equity investor Advent.
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The £11 billion money transfer company Wise also announced plans to move its primary listing from London to the US this month.
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Coupled with a lack of IPO activity, London’s stock market exodus means the market is shrinking. The London Stock Exchange saw just 18 IPOs last year according to EY, the lowest figure since the accountancy firm started recording this data in 2010.
“More companies have left the UK stock market than have joined it so far this year, which means we continue to see a shrinking pot of opportunities for investors,” said Dan Coatsworth, investment analyst at AJ Bell. He points out that takeovers have been a key reason for many of this year’s exits, as trade buyers and private equity companies swoop in to take advantage of cheap valuations.
“At the bottom end of the market, many small companies can no longer justify the cost of listing so they are voluntarily delisting,” he added. “Small-cap appetite remains scarce among investors and that situation might not change until we have significantly less uncertainty on the markets.”
Companies listed in the UK – large and small – have also expressed frustration at their depressed valuations compared to international peers. Shell is one such example. While the oil giant is not currently engaged in “live discussion” about moving its listing from London to New York, chief executive Wael Sawan told Bloomberg last year that he would “have to look at all options” if things didn’t improve. “I have a location that clearly seems to be undervalued,” he said.
There are other issues at play too – stamp duty on UK shares is sometimes cited as a deterrent for investors. Competitors like the US have no equivalent tax. A lack of investment from UK pension funds has also been identified as a problem, with international peers directing a larger proportion of their pension wealth into their own stock markets than the UK does.
LSE exodus: why does it matter?
If companies still have a presence in the UK, conduct business here, and pay tax to the UK government, does it really matter if they are listed elsewhere or privately owned?
Jason Hollands, managing director at investment platform Bestinvest, told MoneyWeek: “While shifting a listing to an overseas market does not in itself change where a company pays tax, if it is still based in the UK and has significant operations here, a change in where a company is listed can end up being followed by a gradual shifting of headquarters and focus overseas given the amount of time that senior management spend meeting investors.
“Likewise, when a company is acquired by an overseas firm, substantial UK head office costs and jobs will typically go as the acquirer achieves savings.”
A more immediate impact will also be felt in the City. As well as losing prestige, Hollands points out that London loses out on “future earnings from corporate broking, M&A advice, equity research, sales and trading and, in turn, ancillary services like legal advice” when companies decide to list elsewhere.
The fund management sector – one of the UK’s biggest industries – will also feel the effects if the UK continues to dwindle in importance on the global stage. “This should matter to the UK, as the City (and Edinburgh) and the earnings of the people who work in these key financial centres are significant contributors to tax receipts,” Hollands said.
As well as the economic impact, UK investors lose out when companies leave the London Stock Exchange, as they are left with less investment choice. Of course, most investors take a global view and diversify their portfolio with exposure to a range of different regions, but there are distinct advantages that come with investing in your home market as well. One of these is the lack of currency risk.
“When a company changes its primary listing to the US, an investor could in theory still buy the shares, but as a US listing will virtually always be denominated in dollars, UK based investors take on currency risk when buying these shares,” Hollands said.
“Over the last decade, a strong dollar has been a tailwind when investing in US companies so this risk may not be so apparent, but the tide has turned in 2025 with the dollar declining around -7% against the pound since the start of the year. This has turned the S&P 500’s small positive return of 2.6% year to date into a loss of -5.3% when translated into pounds.”
Can the London Stock Exchange turn things around?
The government has identified the lack of UK investment as a problem and is hoping to use pension assets as a vehicle for reinvigorating the domestic market.
Under the new Mansion House Accord, signed last month, workplace pension schemes have pledged to “back British” by investing 5% of savers’ money in UK private market investments. Despite being public-market assets, UK shares listed on the Alternative Investment Market are included in this pledge.
ISA reform has also been widely rumoured, with the chancellor keen to funnel more money into the stock market. This could involve reducing the cash ISA allowance in the hope that savers will be encouraged to invest instead.
It is unclear whether the government would take steps to ensure any additional ISA investment was funnelled into the UK rather than overseas investments. The previous government looked at introducing an additional £5,000 British ISA allowance, but the plans were ultimately dropped.
Last year, the City watchdog also relaxed its listing rules in an attempt to entice IPO activity. Changes included giving company bosses more power to make decisions without shareholder votes, and allowing them greater flexibility to adopt dual share structures (often used by founders to give them greater control).
Chancellor Rachel Reeves said the rules would bring the UK “in line with international counterparts” and help attract “the most innovative companies” to list here.
A potential Shein IPO was in the spotlight last year, but reports suggest the Chinese fast-fashion company is now looking to list in Hong Kong after its plans did not get the backing of Chinese regulators. The FCA had previously given the go-ahead for a potential London IPO, despite concerns about forced labour in Shein’s supply chains.
Despite the continued dearth of IPO activity, some have suggested that the outlook for UK equities is improving. The market remains undervalued, but performance so far this year has been good. Could it translate into a brighter outlook for the London Stock Exchange?
“There is growing optimism that new listings candidates are now considering London given recent regulatory reforms and uncertainty in the US making New York IPOs a little less attractive,” said Samuel Kerr, head of equity capital markets at market intelligence firm Mergermarket. “If these come through it could finally reverse some of the doom narrative for the exchange.”
The proof will be in the pudding – and this month brought more bad news when investment company Colbalt Holdings abandoned plans for a $230 million float (£171 million). It would have been London’s largest IPO in about two years, according to Bloomberg.
