The City's post-Brexit plan to stay on top
March 11, 2021
When the UK left the European Union in January, to the casual observer it seemed to be the end of Brexit. Job done, off to the pub. Indeed, many of its advocates tried to frame it that way. But to the rest of us, it was just the start.
- For The City, a lot remains unresolved. Not only are the UK and the EU yet to agree on how they will cooperate on financial services regulation, but it's also still unclear how London will forge a new path for itself outside of the EU.
- For the VC industry, the issue of IPO reform looms large. With London's reputation as a gateway to Europe undermined—if not obliterated—by Brexit, its superiority as a global center for finance and innovation can no longer be assumed. Look no further than Amsterdam's trumping of London in January as Europe's most active trading hub. This new reality underpinned the findings in the recently unveiled Hill Review of public-market listings, along with the UK's proposed budget.
- Big opportunities lie ahead in 2021. In the US and Europe, tech IPOs and SPACs will abound. Some say London—with its lack of dual-class shares and its outdated, un-SPAC-friendly rules—risks losing out to not only New York, but also rivals on the continent. The Hill Review recommends addressing these specific hurdles, among other changes.
- It may be paying dividends. Just a day after the proposals were published, Deliveroo confirmed plans for a London IPO, with the intention of being one of the first to hold a dual-class share listing. But given the political timing of the news, and the fact Deliveroo seemed likely to list in the UK regardless, it's unclear if this is an early sign of success.
- Not everyone will be cheering the reforms. Some UK investors remain skeptical about dual-class shares and worry about the outsize influence they could give to tech founders, and rightly so (see WeWork). Moreover, the jury is still out on SPACs. Yes, it's an efficient means of going public, but I would not be the first to question the wisdom of skirting around IPO processes that were put there for a reason: to protect investors.
- "Be careful what you wish for, London" may yet prove to be the lesson here. It's still early days, but in the UK's rush to preserve London's stature post-Brexit, there is a danger that missteps will be made.
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