UK pension investors have attacked the Financial Conduct Authority’s (FCA) proposed changes to UK listing rules, expressing concerns that the evidence base, investor views and the impact on savers have not been adequately considered.
In a letter to the FCA, a group of institutional pension investors representing billions in assets, including People’s Partnership, Railpen, London Pensions Fund Authority and others, warn that the FCA’s upcoming decision on revised UK listing rules will negatively impact the attractiveness of UK-listed companies to high-quality, long-term investors as well as outcomes for pension scheme members.
The group says that revisions such as allowing for dual-class share structures that dilute shareholder rights will make UK-listed companies less appealing to long-term investors, lowering company value and increasing capital costs due to greater perceived risk. They argue that a decrease in firm value could lead to worse outcomes for pension scheme members.
“We do not think the CP23/31 proposals will lead to the healthy capital markets we all want. Instead, we think they will make the UK less appealing as a destination for capital, exacerbating the current issues by making UK-listed companies less attractive to the kinds of high-quality, long-term investors that both our pre- and post-IPO companies tell us they are looking for,” the letter states.
The letter stresses that retaining key shareholder rights is essential for maintaining the UK’s reputation as a high-quality market.
It warns that “The evidence base – particularly on the kinds of long-term dual-class share structures that CP23/31 would enable – is clear that diluting shareholder rights in this way can be detrimental to firm value even in the near-term. This will in turn lead to worse outcomes for our members.”
Additionally, the pension investors say they are “surprised by media reports that a final decision on these proposals may be announced only a few weeks after the July 4th general election given there may be a change in government and the composition of Parliament.”
The group is calling on the FCA to exercise more caution in its approach, taking into account the recent election and making sure that any modifications serve the long-term interests of pension savers as well as the UK’s attractiveness., arguing that a “healthy capital markets need to be attractive both to companies and to investors.”
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