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Corporate brokersCRHYour browser does not support the element. are a peculiarly British phenomenon. Serving as a bridge between founders and investors, brokers have worked at their clients’ beck and call for a fraction of the cost of an investment banker in the hope of more lucrative mandates down the road. But as listings have dried up, their fate has become perilously entwined with another British phenomenon: an ailing stockmarket.Many stock exchanges around the world are shrinking. But London’s has become glaringly depleted. Last year 86 companies (roughly one in 20 of all listed firms) delisted or transferred their primary listing, making 2024 the worst year for exits since the global financial crisis. Just 20 joined. For Peel Hunt, a City broker founded in 1989 by old Etonian chums, Charles Peel and Christopher Holdsworth Hunt, this means fewer opportunities to generate fees. “The London market has had a lousy three years,” concedes Steven Fine, the firm’s current boss.Higher valuations and deeper pools of capital explain some of the exodus. London-listed firms trade at an average discount of 52% to their American counterparts, according to Goldman Sachs, a bank. Flutter Entertainment, a gambling company, and , a building-materials firm, are among the firms that have moved their main listing to New York as a result. In all, 150 firms listed their shares across the pond last year. “If London could get a handful of listings each month, we’d be doing cartwheels,” Mr Fine says.Private markets are another reason for the exodus. Abundant alternative sources of funding have enabled businesses to stay private for longer, delaying the shareholder scrutiny that comes from going public. There are upsides to this approach, as Peel Hunt’s own listing demonstrates. Since it went public on London’s Alternative Investment Market in 2021, its stock price has plunged by more than three-fifths.Private markets bring risks, too: they are more opaque and less regulated than public ones. They are also less liquid. An end to cheap borrowing signals new financial realities for private funds that will, at some point, expect a return. The pressure to exit companies now “too big to be private”, according to Mr Fine, will shift the momentum back to public markets.This is happening to a degree. In December London welcomed the blockbuster listing of Canal+, a media company previously owned by Vivendi, a conglomerate backed by France’s billionaire Bolloré family. The deal marked the largest debut on the London Stock Exchange since 2022. Shein’s proposed stockmarket debut this year is set to be even bigger: the fast-fashion group has an estimated valuation of £51bn ($66bn).New listing rules should also boost public offerings. They loosen restrictions on dual-class shares, offering founders more powerful voting rights. And they drop the requirement for shareholder votes on acquisitions or disposals. The overhaul, announced in July by the Financial Conduct Authority, Britain’s financial watchdog, brings the rules in line with New York’s, but will take time to bear fruit.Mr Fine would like to see more done to incentivise domestic investment in British equities. A third of British stocks are held at home, compared with more than four-fifths in the mid-1990s. The Labour government’s plans to consolidate local-government pension schemes into megafunds could unlock billions of pounds for British stocks. But the best prospects for stockmarkets lie with private-equity investors seeking to cash out.Until then, brokerage firms are working to mitigate the impact of Britain’s languishing capital markets. Many have merged. Numis was acquired by Deutsche Bank in 2023; Panmure Gordon and Liberum, two midsized brokers, merged last year. Peel Hunt has opened an office in Copenhagen and is expanding in America. It has also pivoted towards advising on the mergers and acquisitions of listed companies. Fees at its investment-banking division jumped by more than 60% last year. Brokers are diversifying—and becoming less British.
