Yahoo Finance British stock market ‘suffers breathtaking decline in relevance’
British stocks have suffered a “breathtaking” fall from grace and are no longer seen as must-own assets, a powerful group of international investors has claimed.
The Investor Forum, which represents top fund managers such as Blackrock, Aviva, UBS and Norway’s oil fund, said corporate boards, investors and regulators needed to do more to attract investment into the UK in the face of more competition than ever for capital.
Andy Griffiths, executive director of the Investor Forum, said: “The declining relevance of UK equity markets over the last 25 years has been breathtaking.
“It is crucial that the focus of any reform recognises the global nature of financing and seeks to create an environment in which UK listed companies can once again thrive.
“We cannot simply hope for a better outcome – practical steps are needed from companies, investors and regulators if we are to create a vibrant marketplace which can attract international capital.”
Without urgent reforms to make listing in the UK and investing in UK-listed companies more attractive, the country’s markets will continue to diminish in importance, the forum warned.
The group also warned of icy relations between boardrooms and institutional investors, which have been accused of “box-ticking” and “grandstanding” over issues such as the environment and pay.
It said relations had been fraying for years and there was clearly “disquiet among a number of FTSE chairs with the state of stewardship”.
Many of the clashes were down to a “a difference of opinion” over pay and “over-boarding”, where a director holds too many board positions.
“Remuneration committees seek to incentivise management teams and attract and retain global talent, and investors seek to exercise restraint based on client expectations or where there is a sense of misalignment between compensation outcomes and value creation,” the Investor Forum’s review said.
“Given the challenges that society faces with the cost of living crisis, and the large number of remuneration policies that will need approval in 2023, we would expect that remuneration issues will emerge at a significant number of companies. As such, the 2023 AGM season will likely be challenging.”
Tensions have been simmering between big investors and British companies over so-called stewardship, an umbrella term investors have used to describe their lobbying to improve their ESG (environmental, social and governance) credentials at companies they invest in.
In November, a report by financial and corporate PR firm Tulchan chronicled grumblings from a host of City chairmen and directors who claimed that major shareholders were taking a formulaic and overly-prescriptive approach towards ESG issues.
Participants included Sir Douglas Flint of Abrdn; Lord Stuart Rose, chairman of Ocado; Tesco chairman John Allan; and Sir Andrew Mackenzie of Shell.
Some claimed they were effectively “locked in a struggle” with investors over how their companies should be run when previously these backers had taken into account individual circumstances or accepted assurances from boards on various policies.
One seasoned chairman is said to have complained: “Investors are intervening too much in granular detail… It’s gone too far”.
