City insiders and financial leaders are calling for a sweeping overhaul of regulations, including looser bonus caps and targeted tax incentives, to reverse the steady decline of the London Stock Exchange. With listings dwindling and firms increasingly favouring New York or private markets, pressure is mounting on the UK government to act decisively or risk long-term erosion of its capital markets.
London, once the beating heart of global finance, has been losing ground to international rivals. The number of companies listed on the London Stock Exchange has dropped by more than 40% since 2008, with only a handful of major IPOs in recent years. High-profile losses, such as ARM Holdings choosing to list in the US, have exposed systemic weaknesses in the UK’s financial framework.
Among the key issues cited is the UK’s regulatory stance on executive pay. Critics argue that the EU-era cap on banker bonuses—limiting variable pay to twice base salary—is stifling talent and competitiveness. Since Brexit, the UK has had the option to lift these constraints, but reforms have been slow. Proponents of deregulation believe that allowing firms to reward success more freely would help attract and retain top financial professionals.
At the same time, there are growing calls for tax reforms aimed at stimulating investment. Proposals include cuts to capital gains tax, new incentives for pension funds to invest in UK equities, and more flexible rules for retail investors. Supporters argue that such measures could revive domestic demand for British stocks and encourage firms to stay local rather than chasing capital overseas.
Chancellor Jeremy Hunt has acknowledged the need to revive the City and boost capital formation, but any concrete policy shifts remain under review. A consultation on prospectus reform and listing rule modernisation has been launched, yet critics warn that without swift and bold moves, London risks falling further behind.
The issue goes beyond prestige. A shrinking stock market affects the entire economy, limiting access to capital for small and mid-sized firms, weakening transparency and governance, and reducing opportunities for ordinary investors. It also undermines London’s status as a hub for innovation, particularly in fintech, biotech, and green finance.
Doubts about political will persist. Some policymakers remain wary of being seen to favour bankers during a cost-of-living crisis, while others argue that boosting the City could, in turn, help fund public services through increased tax receipts and job creation.
The clock is ticking. With New York, Frankfurt and Dubai all aggressively courting listings, London must adapt or accept a diminished role. Reforming bonus rules and tax policy may be controversial—but many in the City now see them as essential lifelines.
REFH – newshub finance
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