Britain’s top 100 companies would be worth towards £500 billion more if they moved their stock market listings to New York, shock analysis for the Evening Standard shows.
Amidst growing fears that the London stock market, once the premier equity index in the world, is in danger of becoming a backwater for equities, research shows the gap in valuations is worse than previously realised.
More and more large businesses are threatening to move their share listing away from London in frustration at the low value given to their shares.
The FTSE 100 market value is today about £2.55 trillion. Based on its combined profits and earnings, it would be £460 billion higher were US share values applied.
The world of investment did not take the UK’s decision to leave the EU too kindly. In fact ever since June 2016 confidence in the UK as a country to invest in has slowly dissipated.
Alan Miller of SCM Direct, who compiled the figures, says Brexit and a focus on ESG (environmental, social and governance) issues have made investors wary of UK shares.
He said: “The world of investment did not take the UK’s decision to leave the EU too kindly, with confidence in the UK as a country to invest in slowly dissipating since June 2016.
“However, the real gulf in valuations is between the US and UK. In the last seven years, the average US company coming to market is valued over a 3-year period at 25x earnings. In the UK it is only roughly 15x earnings.
“UK companies on a like for like basis are valued 18% less than their Us counterparts. This anomaly ventures to suggest that if the UK companies were quoted in New York their valuation would probably be £460 billion higher than it currently is. No wonder investors have become wary.”
These low valuations leave top UK companies vulnerable to bids from private equity. In February Canaccord Genuity drew up a list of 20 top UK companies at risk, including Hikma Pharma, Computacenter, Playtech and RWS.
Last night Dechra Pharma said it is in talks over a £4.6 billion bid from EQT, a Swedish private equity house.
There are growing calls for the government to act to prevent an exodus of companies away from the City. In particular, pension funds, which are encouraged by regulators to buy bonds rather than shares, should be set free, say many.
Miller adds: “The Government must pull the led out to encourage reluctant visitors back into the fold. London must offer attractive regulatory requirements and taxation benefits as soon as possible.”
Alasdair Haynes of Acquis Exchange said: "This is a startling gap in valuations between the US and London and a worrying sign. Regulations need to change. I have been calling for a radical overhaul of stock exchange rules and I hope that the FCA and the government will address these issues with a sense of urgency.”
Miller’s detailed analysis, which can be read below, applies across most sectors. Even the UK’s unloved banking sector would be valued around 25% higher if they were listed in America.
Figures earlier this week showed there have been just five new stock market floats in London this year, raising a paltry £81 million. That is thin gruel for the brokers who rely on deals to stay in business. Job cuts across the City are beginning to cut deep.
The government is planning a series of measures in the Autumn statement to bolster City competitiveness, but there are fears this may be too-little-too late.
https://www.standard.co.uk/business/bri ... 74084.html
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