The head of the London stock exchange has called on Labour to deliver a boost to domestic investment as the exodus of companies from Britain becomes a ‘national security issue’.
In a stark pre-Budget warning, Julia Hoggett urged ministers to prioritise UK capital markets as a ‘strategic’ capability helping the country keep hold of its strongest companies.
Her intervention came as two more UK-listed firms, National Express owner Mobico and Ashtead Technology, succumbed to foreign takeover offers totalling nearly £800m in a fresh blow to the City.
Writing for This is Money, Hoggett warned that while Britain has ‘no shortage of great companies and no shortage of capital’, the country does suffer from ‘a shortage of capital that we invest in ourselves’.
She added: ‘As a result, we risk becoming a country that creates world-leading companies only to watch them scale elsewhere. This is not simply an economic issue. It is increasingly a national security issue.’
Hoggett pointed to the key role of UK finance in the defence industry.
LSE boss Julia Hoggett urged ministers to prioritise UK capital markets
She noted that in addition to scientists needed to carry out research, companies to develop ideas and investors to provide funding, they required ‘a deep enough pool of domestic capital that enables those companies to become global leaders from the UK’.
Hoggett added: ‘If any link in that chain breaks, we should not be surprised when ownership, investment, decision-making and strategic influence move to jurisdictions with better conditions for strategic companies to scale.
‘As the Government considers how best to drive growth, it should view its capital markets as a strategic national capability and therefore a source of national economic security.’
Hoggett said that means having policies that incentivise domestic investment and ensuring British companies can access UK markets for funding when needed.
‘In the end, a country that does not invest in its future may ultimately find it no longer controls it,’ she added.
It comes after Hoggett earlier this month called on Chancellor John Healey to ‘take the handbrake off’ UK listings by axing stamp duty on shares and bringing back tax credits for domestic investing.
Latest evidence of the exodus from London came yesterday as National Express owner Mobico revealed that it was ‘minded to recommend’ an offer from Span’s Autobuses de Leon – valuing it at £280m – to shareholders.
And subsea technology firm Ashtead Technology said it had agreed to a £505m takeover by New York private equity firm Ember Infrastructure Management - in a move likely to provoke calls for a government national security review.
The Department for Business and Trade declined to comment when asked whether it would intervene.
It adds to an exodus of companies from the London market which has seen 166 takeovers worth £180bn since the start of 2023, including £74bn so far this year. At the same time, fewer are seeking to list in London to replace them.
Also yesterday, it emerged that Associated British Ports – Britain’s biggest ports operator – has been acquired by its latest foreign owner, as Australia’s IFM Investors bought a majority stake from a consortium of Canadian pension funds in a deal valuing it at more than £10bn.
Many UK-listed companies are being bought up on the cheap by foreign investors who see them as a bargain. Cambridge-based Arm Holdings, one of the world’s most important chip companies, was cited as a key example buy Hoggett.
Once London-listed, it was sold to a Japanese investment fund in 2016 and returned to the stock market in 2023 – but in New York, in a major blow to the City.
Hoggett said she did not want to penalise companies for leaving.
‘What we must do is create the best environment for them to stay,’ she said.
We cannot afford to keep exporting our future
By Julia Hoggett, CEO of the London Stock Exchange and Chair of the Capital Markets Industry Taskforce
From defence spending and energy resilience to Artificial Intelligence and quantum computing, policymakers are rightly focused on the capabilities we need to thrive in a more uncertain world.
One question often not included in the conversation is how we ensure that the next generation of strategically important companies not only start in the UK, but, critically, stay here.
Britain is remarkably good at creating world-class businesses. What we have been less successful at in recent times is ensuring those companies can access the investment they need at every stage as they grow and in a way that incentivises them to stay here.
This challenge is evident in some of Britain's most promising emerging industries.
Cambridge Quantum Computing was one of Britain's most exciting quantum technology businesses. Unable to find sufficient domestic growth capital, it merged with an American business in 2021, becoming Quantinuum. Because quantum computing is treated as a critical pillar of US national defence and intelligence, its legal, policy and economic frameworks have since helped shape the company’s operations.
America has recognised the strategic value of critical technologies and has built a policy, procurement and capital environment designed to retain them.
Britain should show the same clarity of purpose. Through procurement policies, national-security frameworks, investment incentives and deep pools of domestic capital, the US demonstrates how economic policy, capital markets and national security reinforce one another.
It is not the first time we have seen a British trailblazer gravitate to the US, and on the current path, it will not be the last.
Take Arm, the semiconductor company. Cambridge-founded, used in everything from phones to drones. Bought off the UK stock exchange by a Japanese investment fund in 2016 and then relisted in the US in 2023. While still headquartered and heavily invested in the UK, its ownership, board composition and the public-market relationship now point overwhelmingly beyond the UK. Its rapidly expanding workforce of US-based engineers and its $71 million investment in a US engineering and innovation hub, an illustration of this reality.
This is not a criticism of these companies or their investors; they are responding rationally to incentives. But Britain should pay attention. Too often, we behave as though inventing the future is enough. It is not.
This is not about penalising companies for leaving either. What we must do, is create the best environment for them to stay.
If British taxpayers help fund the research, British universities train the talent and British entrepreneurs create the company, we should also want the UK to be a place where those businesses can thrive as global champions.
Investment is crucial. The UK has no shortage of great companies, and we have no shortage of capital. But we do have a shortage of capital that we invest in ourselves. As a result, we risk becoming a country that creates world-leading companies only to watch them scale elsewhere. This is not simply an economic issue. It is increasingly a national security issue.
A strong defence industrial base is not built through a government’s statement of intent alone. It requires the scientists that do the research, the companies that develop the ideas, the investors that provide the funding to make those ideas reality and, eventually, a deep enough pool of domestic capital that enables those companies to become global leaders from the UK.
If any link in that chain breaks, we should not be surprised when ownership, investment, decision-making and strategic influence move to jurisdictions with better conditions for strategic companies to scale.
As the Government considers how best to drive growth, it should view its capital markets as a strategic national capability and therefore a source of national economic security. That means having policies that incentivise greater domestic investment into British opportunities and ensuring that British companies can access UK public markets for funding when needed.
Because in the end, a country that does not invest in its future may ultimately find it no longer controls it.