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If two of the main benefits of hosting a big company’s UK stock market listing are the tax revenue it raises through stamp duty and the cachet of the listing itself, then drugs giant AstraZeneca has just delivered another humbling blow to London as a financial centre.
On top of the symbolic humiliation, the decision by Britain’s biggest listed company to move its share listing to New York and leave only depository interests trading on the London Stock Exchange, will cost the Treasury an estimated £200mn in lost stamp duty (depository interests, securities that represent rights to shares listed elsewhere, do not attract stamp duty).
The LSE is clinging to the hope that there may yet be a silver lining for London liquidity — without a stamp duty charge, Astra’s trading volume could theoretically increase. More likely, a full NYSE listing will pull more of the trading liquidity across the Atlantic.
The broader trend is no different. The fashion for moving listings from Europe, particularly London, to New York is accelerating. Money raised via new London listings is at a 30-year low.
It is instructive to consider the sometimes neglected third leg of AstraZeneca’s triumvirate of listings: the group retains a Swedish quotation on the Nasdaq Stockholm exchange. Though the volume of shares traded there is only a fraction of that passing through London or New York, the retention of the listing — a relic of the group’s part-Swedish heritage — is telling.
Writ large, the Stockholm exchange — and the broader Swedish approach to the country’s equity culture — has much to teach the UK. Over a period of 50 years, a succession of tax policies, pensions launches and investment product innovations has spurred a vibrant equity culture in the country. According to Fondbolagens förening, the local fund management association, fund investment is more popular in Sweden than anywhere else in the world, with eight in 10 Swedes invested in funds.
A thriving pensions market provides ready anchor investors for Swedish initial public offerings. Market liquidity is also underpinned by widespread direct retail investment, much of it channelled through the ISK tax-efficient investment vehicle — which includes a SEK150,000 (€14,000) annual tax-free investment allowance. It is a rough equivalent of Britain’s ISA, though without the option to save in cash. At the end of 2023, according to the OECD, there were 3.8mn unique dedicated investment savings account (ISK) holders, in a total population of 10.6mn.
Returns have been impressive, too, especially over the long term. In recent years the US market might have been a runaway winner versus the rest of the world, thanks to its dominance of global tech. But Nasdaq figures suggest that over the past half century or so, Swedish returns actually outstrip any other major market, delivering an 8.2 per cent total return, compared with 5.9 per cent for the US and 5.8 per cent for the UK.
None of this is news to UK and EU policymakers, who are painfully aware of the Swedish example. Mario Draghi’s landmark report on European competitiveness, published a year ago, urged the EU to incentivise stock market investment for households’ €1.4tn of annual savings, citing Sweden’s gold standard. For the general good, Europe must persuade its citizens to abandon their cash-under-the-mattress caution.
Sweden is not impervious to the lure of higher US valuations. Swedish “buy now, pay-later” lender Klarna opted for a New York listing only last month. Music streamer Spotify made the move back in 2018.
But the appeal of the Swedish market endures. Just ask Hellman & Friedman-owned Verisure, the Swiss/Swedish security group, which last week said it was targeting a market capitalisation of up to €13.9bn in a Stockholm listing, having seen off a listing pitch from the London Stock Exchange. Verisure is set to be Europe’s biggest market debut since Porsche in 2022.
London’s revenge may come early next year if rival private equity group HG presses ahead with plans to list Norwegian software group Visma in London rather than on the exchange of its Scandinavian neighbour. But in the meantime the UK must do far more to burnish its credentials — building on the mooted exemption of new IPOs from stamp duty to overhaul the whole antiquated stamp duty system and its penal treatment of UK company share purchases. ISA rules need tightening to give an added incentive for share investment over cash. Without resorting to unwelcome mandation, pension funds should be incentivised to invest in UK stocks.
When Britain’s biggest listed company sends the signal it did last week, everyone with an interest in the country’s future prosperity should take heed.
patrick.jenkins@ft.com
