Interview
Julia Hoggett, CEO @ LSEG plc: The Myths and the Reality of The London Stock Exchange
- Market Disconnect: The UK has severed the link between its domestic economy and capital markets, driven by regulatory shifts, the EU single market's dominance, and pension reforms that reduced risk capital investment over the last 30 years.
- US Listing Performance Data: In the last decade, only 20 UK companies listed in the US raising over $100 million; of these, 9 have already delisted, 4 are trading up, and the remainder are down over 80%.
- Stamp Duty Critique: Stamp duty is characterized as a "perversity" that taxes domestic investment (e.g., buying UK stocks or Aston Martin cars) while foreign competitors (e.g., US stocks, Tesla) face no equivalent tax, raising ~£3-4 billion annually for the Treasury.
- Proposed Stamp Duty Reform: The path to removing stamp duty involves tapering it for retail investors under specific ticket sizes, offset by incentives to encourage domestic pension funds to invest in UK equities rather than cash.
- Pension Reform Strategy: The government is consolidating Defined Contribution (DC) schemes into larger, sophisticated pots to replace the de-risked Defined Benefit (DB) era, aiming to replicate the investment models of Canada (CPPIB) and Australia.
- Mansion House Compact: The 11 largest UK default DC schemes have committed to allocating 5% of total assets to private companies (predominantly UK-based) by 2030.
- Five-Finger Glove Reform Agenda: LSE's UK reform strategy is structured around five pillars: capital raising rules, sell-side research incentives, pension/retail reform, tax incentives, and cultural celebration of entrepreneurship.
- Listing Rule Flexibility: The UK updated listing rules last year to match global standards, removing historical rigidity that existed since the 1980s and allowing broader company access.
- Research Funding Reversal: The UK reversed previous rules banning banks from charging trading commissions to fund research, restoring the traditional model to improve the quality of equity research available to investors.
- Regulatory Philosophy Shift: The regulatory approach is moving from "cost-based" regulation to "outcome-based" regulation, focusing on net returns and financial literacy rather than minimizing fees, which previously discouraged investment in private assets.
- Retail Investor Disenfranchisement: Recent regulatory reforms aimed at protecting retail investors have inadvertently made it harder for them to access advice and regulated markets, contrasting with the easy access available in cryptocurrency.
- CEO Compensation Debate: UK CEO pay is currently suppressed by cultural norms and investor expectations, creating a disadvantage in attracting global talent needed to run multi-hundred-million-dollar companies compared to international peers.
- Valuation Myths: Data contradicts the narrative that UK-listed companies suffer systematic undervaluation; like-for-like analysis shows UK and US valuations align closely based on fundamental growth rates, not domicile.
- Liquidity Reality: Adjusted free float turnover in the FTSE 100 is higher than the S&P 500 or NASDAQ, despite media narratives claiming the US market offers superior liquidity.
- Index Inclusion Advantage: Companies listing in London can gain immediate FTSE 100 index inclusion within five days, whereas US index inclusion (e.g., S&P 500) often requires a year or more and strict US revenue domicile criteria.
- Brexit Impact: Brexit forced a re-evaluation of the city's role, shifting focus from solely serving the EU single market to actively driving the UK domestic economy, with London remaining the largest equity capital market in Europe.
- 2024-2025 Capital Ranking: The UK was the second-largest equity capital market globally by capital raised in 2024-25, trailing only the US and India, and raising more equity capital than the next three European venues combined.
- Cultural Mindset: A pervasive national tendency toward "cynicism" and talking down British success is identified as a barrier to celebrating entrepreneurship, contrasting with the optimism inherent in the US market.
- Future Vision (2035): The goal for the LSE is to be the default choice for significant UK companies where domestic capital drives financing from startup through scale, creating a virtuous circle of growth and investment.
- Fast-Fire Insights: Julia Hartz (CEO of LSE) believes problems are fixable if the system is changed, notes that operating on four hours of sleep is unsustainable, and emphasizes the need to balance nuanced discussions on issues like climate transition costs against binary political arguments.