The sad decline of the London stock market

There is plenty for anyone in Paris to feel smug about if they happen to look across to the other side of the English Channel right now. France has been able to watch British prime ministers come and go with almost comical regularity. It can supply everyone else with electricity from its nuclear power stations if they ask nicely enough. And it is about to watch its football team cruise to defending its crown at the Qatar World Cup. But there is one more that will make the French especially pleased. Paris has just overtaken London as Europe’s largest stock market – and the UK has only itself to blame. 

According to calculations by Bloomberg, London has just lost its historic position as the continent’s largest market, the first time that has happened since it started crunching the data back in 2003. All the shares listed on the London market put together are now worth $2.821 trillion (£2.405 trillion), while all the shares on the Paris bourse are worth $2.83 trillion (£2.413 trillion). It might be a marginal difference. And yet, in reality, it is likely to increase over time. That matters. Global investors, fund managers and the banks and brokers that service them go where the money is, and right now there is more of it in Paris than London. 

In truth, the City, and our government, only has itself to blame for that. The first issue is that Paris has more exciting companies than we do. A large part of Paris’s out-performance can be attributed to a single business, Bernard Arnault’s luxury goods empire LVMH (indeed, Arnault reclaimed his place as the world’s richest man last year before losing it again to Elon Musk). LMVH’s share price has doubled over the last five years, powered by the insatiable demand in Asia for high-end brands, taking it to a market value of 350 billion euros (£308 billion). It has overtaken Meta, the owner of Facebook. It is the Apple of Europe, a company that keeps on generating more and more profits regardless of what else is happening in the world.

By contrast, London’s largest company is the oil and gas giant Shell, with a value of £165 billion, and even though it got a slight boost from the rising oil price, it is hardly a growth business. Indeed, without LVMH, Paris would still be smaller than London, and by quite a large margin. 

The second is that growing tech companies coming out of the UK have regularly chosen to list in New York instead. Firms such as Soho House, Cazoo, or the fashion platform Farfetch, and soon perhaps the chips manufacturer ARM, have chosen to list in the US. If they had listed in London, our total would be looking a lot better. 

In reality, the government has paid far too little attention to the health of the London market. It has moved far too slowly to rid the City of the restrictions imposed by the EU. It has imposed far too many governance codes on listed companies, adding to the costs of a listing. And now it is pushing corporation tax up to one of the highest levels in the developed world, and is threatening big increases in capital gains tax as well. The UK has already squandered London’s lead ove