City workers in Paternoster Square, where the headquarters of the London Stock Exchange is based, in the City of London, UK, on Thursday, March 2, 2023.
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British chip designer Arm, owned by Japan’s SoftBank, and building materials group CRH intend to shun London and pursue stock market listings in the U.S., dealing a blow to the U.K.’s post-Brexit vision.
Arm said in a statement Friday that it was seeking to pursue a U.S.-only listing this year. It comes shortly after CRH, one of the FTSE 100‘s biggest companies, said it plans to move its primary stock market listing to New York.
The news is likely to bolster fears that the U.K. stock market is losing out to international rivals.
“After engagement with the British Government and the [Financial Conduct Authority] over several months, SoftBank and Arm have determined that pursuing a U.S.-only listing of Arm in 2023 is the best path forward for the company and its stakeholders,” Arm CEO Rene Haas said in a statement.
Arm did not completely rule out the possibility of listing in London in the future, saying it was “proud of its British heritage” and may consider a subsequent listing in the U.K. at a later date. It provided no further details.
The decision comes despite intensive lobbying efforts by the British government to persuade the chip designer to list its shares in the U.K. capital. With 6,000 staff globally and 3,000 based in the U.K., Cambridge-based Arm is widely regarded as the jewel in the crown of the British tech industry.
The company is a major force in the semiconductor market, licensing its microchip designs to some of the world’s largest consumer tech manufacturers. Around 95% of smartphones globally, including the Apple iPhone, contain Arm-based processors.
London has relaxed its listings rules in an effort to attract leading global tech companies to go public in the U.K. It faces barriers, with venture capitalists complaining of a lack of understanding of often loss-making tech ventures.
“The U.K. is taking forward ambitious reforms to the rules governing its capital markets, building on our continued success as Europe’s leading hub for investment, and the second largest globally,” a U.K. Treasury spokesperson said.
“We continue to attract some of the most innovative and largest companies in the world – and note Arm’s commitment to expanding its presence in the UK, providing a boost to growth, jobs and investment.”
Earlier this week, U.K. Investment Minister Dominic Johnson urged companies across the globe to consider London for either a primary listing or a secondary or dual listing “because we have got the investment management talent in London.”
“Yes, the U.S. is the biggest capital market in the world, but the biggest international investment market in the world is London because that’s where the people are and the liquidity is,” Johnson told CNBC’s Karen Tso at the Mobile World Congress in Barcelona, Spain. “So, I call everyone to come to the U.K., list in London and benefit from our financial services ecosystem.”
‘Best interests of our business’
Arm is not alone in setting sights transatlantic. Building materials giant CRH said Thursday it was also pursuing a New York listing for “U.S. equity index inclusion as soon as possible.”
The company added: “We have now come to the conclusion that a US primary listing would bring increased commercial, operational and acquisition opportunities for CRH, further accelerating our successful integrated solutions strategy and delivering even higher levels of profitability, returns and cash for our shareholders.”
The group said it would talk to its investors in the coming weeks about why it believes “it is in the best interests of our business and our shareholders” to pursue a primary listing of CRH in New York.
CRH, which said it would remain headquartered in Ireland, will provide a further update in a trading statement on April 26. Shares of the company jumped on Thursday following the news.
Separately, FTSE 100 gambling company Flutter has said it plans to establish a secondary listing in the U.S., while plumbing and heating products supplier Ferguson moved its primary listing to the U.S. last year.
However, Andy Bird, CEO of British education group Pearson, said Friday that the company and its board had not had any active conservations about changing its listing.
“We are very proud to be part of the FTSE, we’re a very longstanding member of the FTSE,” Bird told CNBC’s “Squawk Box Europe.”
Speaking to CNBC’s “Squawk Box Europe” on Thursday, London Stock Exchange Group CEO David Schwimmer said, “There is really no question that London is certainly Europe’s leading financial center and I expect it to continue to be that way.”
— CNBC’s Ryan Browne contributed to this report.