UK Financial Reform Made Urgent Because Of US Subsidies

The US clean technology subsidies are taking capital out of Europe, thereby making it a high priority to enhance London as an international centre, some of the business bosses told the UK lawmakers on April 26.

The Inflation Reduction Act, which rolls out $369 billion in tax credits, research loans, and grants for clean tech funding in the US, is making it a challenging task to persuade firms to apply for a London listing.

One of the chairs of a company, Jonathan Symonds, told the Treasury Select Committee hearing that if they do not use domestic capital, the IRA is going to win. As per him, the pension funds in Britain, which have for a long time considered safer assets such as government bonds and stocks, require consolidation so as to achieve scale for investing among start-ups.

According to the CEO of the London Stock Exchange, Julia Hoggett, a single Canadian pension fund went on to invest more in one private UK company in 2021 than all their pension funds across private companies across the UK in the same year. The decision by one of the chip designers to invest only in New York has already led to deep soul-searching in London after Brexit, which added competition from Paris, Amsterdam, and Frankfurt to the UK financial sector.

As per Jonathan Hill, who has authored a report on reforming UK listing rules backed by the government, the effect of what is taking place through the IRA all across Europe resembles a dirty great hoover in full suction mode. He added that it is, as a matter of fact, reinforcing the mentality that the US is where you want to be for all business.

It is well to be noted that Britain has already gone on to ease the listing rules that are in line with the recommendations made by Hill and has plans for further changes. As per Julia Hoggett, the barricades need to be removed so as to improve research on companies, make primary market rules seamless, and increase the amount of risk capital available so as to ensure the governance rules for the companies that are listed in sync with the competitor nations. As per her, they have gone on to create an environment in which comply or explain has become comply or else.

Although the UK listed companies do disclose if they are following best practises in governance and if not, why not, the critics are of the opinion that there is a loss of flexibility.