The London Stock Exchange: Is it in danger?

Since the beginning of 2024, more than 150 companies have changed their primary listing or left the London Stock Exchange

What are the implications for the economy and investors?

If you look at the headlines about the stock market exodus, you might assume that London is burning. Last year, eighty-eight companies shifted their primary listing or left the London market, and so far in 2025, over 70 have done the same.

Investment site AJ Bell reports that in the first five months of the year ending May 31, there were 42 cancellations on the junior market and 28 on the main market. Since then, there has been a surge in additional announcements.

The semiconductor group Alphawave agreed to buy out US tech giant Qualcomm for £1.08 billion in the first half of June; Oxford Ionics, a start-up university, agreed to be bought out by IonQ, a US quantum computing company, for £1.11 billion; and Spectris, an industrial technology company, was offered a 3.7 billion takeover by private equity investor Advent.

This month, the 11 billion dollar money transfer company Wise also revealed plans to relocate its main listing from London to the US.

The market is contracting due to the exodus from the London stock market and a dearth of initial public offerings. EY reports that the number of initial public offerings (IPOs) on the London Stock Exchange last year was just 18, the fewest since the accounting firm began keeping track of this data in 2010.

Investment analyst Dan Coatsworth of AJ Bell stated, "We continue to see a shrinking pot of opportunities for investors, as more companies have left the UK stock market than have joined it so far this year." He points out that takeovers have been a major factor in a lot of this year's exits, with private equity firms and trade buyers jumping in to seize low valuations.

At the lower end of the market, he continued, "many small businesses are voluntarily delisting because they can no longer afford the cost of listing." Investors still have little appetite for small-cap stocks, and this trend may not improve until there is a great deal less market uncertainty.

Businesses of all sizes that are listed in the UK have also complained about their low valuations in comparison to their global counterparts. Shell is one instance of this. Chief executive Wael Sawan told Bloomberg last year that he would "have to look at all options" if things didn't improve, even though the oil giant isn't currently having a "live discussion" about switching its listing from London to New York. He remarked, "I have a location that obviously seems to be undervalued."

Other factors are also involved, such as the fact that stamp duty on UK shares is occasionally mentioned as a turnoff for investors. There are no comparable taxes in rival countries like the US. Another issue is that UK pension funds don't invest enough; their foreign counterparts invest more of their pension funds in their own stock markets than the UK does.

Why is the LSE exodus important?

Does it really matter if a company is privately held or listed elsewhere as long as it still operates in the UK, pays taxes to the UK government, and maintains a presence there?

While moving a company's listing to an overseas market does not automatically alter where it pays taxes, Jason Hollands, managing director of investment platform Bestinvest, told BFIA that if a company is still based in the UK and has substantial operations here, moving its listing may eventually lead to a gradual relocation of its headquarters and focus abroad because of the amount of time senior management spends meeting with investors.

"Similarly, when a business is bought out by a foreign company, significant UK head office expenses and employment will usually be eliminated as the buyer saves money.

The City will also be affected more immediately. London loses out on "future earnings from corporate broking, MandA advice, equity research, sales and trading and, in turn, ancillary services like legal advice" when companies choose to list elsewhere, according to Hollands, in addition to losing prestige.

If the UK continues to lose its significance on the international scene, the fund management industry, one of the largest in the country, will also be impacted. "The City (and Edinburgh) and the wages of those who work in these important financial centers are significant contributors to tax receipts, so this should matter to the UK," Hollands stated.

The departure of companies from the London Stock Exchange not only affects the economy but also reduces the investment options available to UK investors. However, there are also clear benefits to investing in your home market. Of course, the majority of investors adopt a global perspective and diversify their portfolio by exposing themselves to a variety of different regions. The absence of exchange rate risk is one of these.

Theoretically, an investor could still purchase shares when a company switches its primary listing to the US, but since a US listing is almost always denominated in dollars, UK-based investors assume currency risk when they do so, according to Hollands.

The risk may not be as noticeable because investing in US companies has benefited from a strong dollar over the past ten years, but in 2025, the situation has changed, with the dollar down about 7% versus the pound since the year began. This has resulted in a loss of -5.3% in pounds, despite the S&P 500's modest positive return of 2.6% so far this year.

Will the London Stock Exchange make a difference?

In an effort to boost the domestic market, the government plans to use pension assets as a means of addressing the issue of low UK investment.

Five percent of savers' money will be invested in UK private market investments as part of workplace pension plans' commitment to "back British" under the recently signed Mansion House Accord. Even though they are public-market assets, this pledge applies to UK shares that are listed on the Alternative Investment Market.

With the chancellor eager to invest more in the stock market, ISA reform has also been the subject of numerous rumors. The cash ISA allowance may be decreased in an effort to persuade savers to invest rather than save.

It's unclear if the government would take action to guarantee that any future ISA investments were directed towards the UK rather than abroad. The previous administration considered increasing the British ISA allowance by 5,000, but they eventually abandoned their plans.

In an effort to encourage IPO activity, the City watchdog also loosened its listing requirements last year. Among the changes were the expansion of decision-making authority for company executives without the need for shareholder votes and the possibility of dual share structures, which are frequently employed by founders to increase their level of control.

Chancellor Rachel Reeves claimed that the regulations would help draw "the most innovative companies" to list in the UK and put it "in line with international counterparts."

Shein's possible initial public offering (IPO) was in the news last year, but it appears the Chinese fast-fashion company is now considering listing in Hong Kong after Chinese regulators rejected its plans. Notwithstanding worries about forced labor in Sheins' supply chains, the FCA had previously approved a possible London IPO.

Some have argued that the outlook for UK stocks is getting better, despite the ongoing lack of initial public offerings. Although the market is still cheap, this year has seen strong performance thus far. Would it result in a more promising future for the London Stock Exchange?

"With recent regulatory reforms and uncertainty in the US making New York IPOs a little less attractive, there is growing optimism that new listings candidates are now considering London," stated Samuel Kerr, head of equity capital markets at market intelligence firm Mergermarket. "If these materialize, it may finally turn around some of the pessimistic predictions about the exchange.

Colbalt Holdings, an investment company, announced this month that it had canceled plans for a £230 million float (171 million). The evidence will be in the pudding. According to Bloomberg, it would have been the biggest initial public offering (IPO) in London in roughly two years.

Read More about the London Stock Exchange.