Last month, Rachel Reeves addressed The City, updating on The Government’s growth plans for the collective wealth of the nation. The Mansion House speech always coincides with a flurry of related policy papers and decisions, of which the Leeds reforms very much took the lead. Addressing attitudes to risk is without doubt a vital aspect, if we are to encourage more savers to shift from cash to equities and deservedly this grabbed the headlines, but to us at Avenir, it’s what didn’t make the cut for the speech that left us all a little confounded.
We have previously discussed the digitisation agenda in this column, expressing our concern that it was critical any reform here – which is admittedly long overdue – didn’t come at the expense of choice. However, the conclusion reached by the Digitisation Taskforce, whose recommendations were released the same day as the Mansion House speech and have been accepted in full by The Government, create something of a quandary.
Moving away from paper-based share certificates finally brings us in line with our European and North American peers, but the removal of choice over how the register of members can now be maintained has the potential to put London at a significant disadvantage to other competing markets. With all holdings having to be on the Central Securities Depositary (CSD), a new layer of intermediation is being foisted upon many. Granted, this is nothing new for the typical retail shareholder who already owns stock via a nominee structure, but it’s those larger shareholders, who have a fundamentally different relationship with the issuer, where the problem sits.
More challenging Investor Relations
Moving these big investors into a nominee structure suddenly makes communicating with them a little less convenient. It’s also harder to keep track of what’s happening with their stock, especially if lock-up type agreements are in force. If push comes to shove, will the investor decide to jump ship and face the – potentially minor financial – consequences later?
Costs go up
Adding a layer of intermediation means that there’s another party involved in the process. And the reality is they aren’t going to work for free. Astute brokers will no doubt be flocking to the market with propositions to onboard certificated retail shareholders and deliver a service, but at what cost today and indeed in the future?
CSD monopoly
The move also raises questions over the consequences of having a single CSD provider, given their elevated and now critical position in the registry management process. They will have a significant amount of work to undertake to align systems with legal requirements and accommodate these new structures, which is again going to come at a price.
Is London really open for business?
We have all heard the rallying cries of London being open for business as a capital market. Indeed, the Mansion House speech recapped a number of initiatives including prospectus reform and listings denominated in foreign currencies, but with this new administrative burden, added costs and lack of choice, do the messages really add up? The government wants to implement the reforms here within a couple of years, so change will be relatively brisk. The threat cannot be underestimated.
Is there a better solution?
At Avenir, we believe that the proposal accepted by the government provides the easiest legislative outcome, rather than the one which serves issuers, investors, and in turn the London market best. Modern registry systems already have the capability to offer more appropriate choice and better levels of control for issuers, whilst also catering to the broad range of needs seen from issuers. Whilst we are ready to admit that the saga of dematerialisation and digitisation has run for way too long already, this final chapter fails to serve London as well as it could.
A footnote on tokenisation
Without doubt this is the topic of the day in terms of so many market infrastructure questions and indeed, the Mansion House speech acknowledged the potential it holds. Maybe, the digitisation agenda is but a formality as the UK catches up with peers and tokenisation holds the answer. Only time will tell, but we must hope that progress on this theme is a little more brisk.
An amended version of this article originally appeared in the August 2025 version of AIM Journal. You can download a printable version here.