Record gap between US and UK indices

The UK’s largest and medium-sized businesses index is currently trading at a record 40% discount to the US markets. This puts more pressure on London as many firms consider switching to Wall Street.

Citigroup analysts raised concerns yesterday about the gap in valuation between the MSCI UK Index and the MSCI USA Index. This index measures the performance of large- and mid-cap segments. Yesterday, technology group WANdisco was the latest to announce that it is considering a US listing.

Citigroup stated that: “As a consequence of this wide-scale value gap, newsflow indicates UK CEOs are facing renewed calls for value for shareholders with relisting over the Atlantic emerging in potential options.”

Citigroup says that the US’s materials, food and energy industries trade at a significant discount to each other. The FTSE 100 listing has left the FTSE 100 listed British energy companies BP and Shell with the largest valuation gaps.

Last week, Arm , a British technology pioneer, said that it would list on the US despite attempts by ministers to discourage it from listing on the London Stock Exchange.

There are calls for reform because of fears of an exodus. Andrew Griffith is the City minister. He said deregulation after Brexit would move faster if needed.

The Treasury committee is about to begin questioning financial leaders about the fall in UK markets. They are worried that London’s City of London may lose its preeminent status as a financial center.

According to a source close to Treasury committee, MPs will be asking questions regarding the decline of UK equity investment as part the wider reform of financial markets. The source said that the committee would have the opportunity to discuss the topic in evidence sessions this week with a variety of financial regulators. MPs will be able to speak with Sam Woods, the head of Prudential Regulation Authority, and Nikhil Rathi, chief executive, Financial Conduct Authority, tomorrow.

Chief executive of the Investment Association Chris Cummings has called for the government to work to create a “modern, dynamic capital market that is a magnet to IPOs of tomorrow’s growth companies.”

He stated that the UK should be the best country in the world for listing a company and to grow it. We want to see the UK’s listings system benefit all of its economy. It should have attractive public markets that are globally accessible and provide long-term returns to investors.

“Government also plays an important role in promoting UK as a listing venue, delivering policy stability, and creating a regulatory climate that fosters innovation. These are all factors that are important for companies considering floating in the UK.