LONDON – Following this year’s Brexit, the UK government needed a new blueprint for the future of the country’s financial services as cities like Amsterdam and Paris vied to become Europe’s next investment and banking capital.

For some, the answer was Deliveroo, a London-based food company with 100,000 riders on scooters and bicycles. Despite losing more than £ 226 million (nearly $ 310 million) in the past year, Deliveroo offered the raw promise of many fast-growing tech startups – and it became a symbol of Britain’s new ambitions by choosing to Go public and list your stocks not in New York, but on the London Stock Exchange.

Deliveroo is a “true UK tech success story,” said Rishi Sunak, the UK’s chief financial officer, last month.

It was a false start. Deliveroo has since been dubbed “the worst IPO in London history”. On the first day of trading, March 31, the shares fell 26 percent below the market price. (It’s gotten worse.)

The flop has damaged the image of the City of London – the geographic and metaphorical name for the UK’s financial center – as it attempts to recover from the country’s exit from the European Union. Some of the effects of Brexit were immediately felt: on the first working day of 2021, trading in European stocks shifted from the venues in London to the major cities of the bloc. Then London’s share of trading in euro-denominated derivatives fell sharply. There is fear about what might go next.

Financial services are an integral part of the UK economy, accounting for 7 percent of gross domestic product – £ 132 billion in 2019, or around $ 170 billion. Exporting financial services and other professional services is something that sets the UK apart. Membership of the European Union allowed London to serve as the financial base for the rest of the continent and the city’s business grew. Four tenths of exports of financial services go to the European Union.

The government has embarked on a series of reviews and consultations on a variety of subjects, including IPOs and trading regulations, to seek ideas to bolster London’s reputation as a global financial center.

For many, the changes cannot come soon enough.

“The UK is not going to sit still and watch its financial services move to other European cities,” said Alasdair Haynes, founder of Aquis, a London trading venue and stock exchange. This will be exciting for the next three or four years, he said.

However, this optimism is not universal. The prospects for a warm and close relationship between the UK and the European Union have deteriorated significantly. The two sides recently finalized negotiations on a Memorandum of Understanding to set up a forum to discuss financial regulation. However, the forum is voluntary and the document has yet to be signed.

The European Union has made no secret of its plans to build its own capital markets, which could flourish if London is denied access. The “mood music in the EU,” said Andrew Pilgrim, who heads the UK government and financial services team at EY, focuses on having autonomy over one’s own financial services rather than relying on the UK.

It is becoming increasingly attractive for Great Britain to write its own financial rules. The trick is to attract more business without lowering regulatory standards in London, which many consider a strong win. A recent Duff & Phelps survey of senior financial managers found that fewer see London as the world’s leading financial center, but that it tops the rankings for the regulatory environment.

Here are some of the plans.

“I want to make the UK the best place in the world for high-growth, innovative companies,” Sunak told Parliament on March 3rd. On the same day, a government-commissioned review recommended changes to encourage technology companies to go public in London. Common New York ideas were suggested that would allow the founders to maintain more control of their company after they began selling shares.

Example: Companies with two share classes and different voting rights (like Facebook) can be listed in the premium section of the London Stock Exchange, which could pave the way for inclusion in reference indices. Or: to allow a company to go public while selling a smaller proportion of its shares than the current rules require.

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April 16, 2021, 10:48 p.m. ET

The timing of Deliveroo’s IPO was no coincidence. It was listed on double-class shares, which gave its co-founder William Shu more than half the voting rights for three years – a structure that should closely align with the review’s recommendations, the company said.

But the idea might be a no-starter among some institutional investors in London. Deliveroo flopped in part because they opposed the offer of shares with minimum voting rights.

Others, however, are enthusiastic about the ideas of the review carried out by Jonathan Hill, a former European Commissioner for Financial Services. Among them is Mr Haynes, whose company Aquis acquired a stock exchange last year to compete with the London Stock Exchange.

“I am very supportive of what Lord Hill did,” said Haynes, who wants his exchange to become “Europe’s Nasdaq” one day. It seeks to lure companies into some of the larger companies that get involved with perks such as a no-sell policy (a practice where investors bet against the price of a stock). The Nasdaq has a coveted reputation for listing technology giants like Microsoft, Apple, and Facebook.

London doesn’t have “that alternative for fast-growing companies,” said Haynes.

Mr. Hill’s report also urges London to become a more welcoming home for special-purpose acquisitions or blank check businesses, the recent craze in the financial markets that has caught on with investors and celebrities alike. SPACs are public shell companies that are listed on a stock exchange and then look for private companies to buy.

London was left in the SPAC passion. Last year, according to Dealogic, 248 SPACs were listed in New York and only four in London. In March, Cazoo, a British used car dealer, announced that it would go public through a SPAC in New York.

There are already signs that Amsterdam could take the lead in this booming business for Europe. This year there were two SPACs each in London and Amsterdam, but the value of the listings in Amsterdam is five times that of London.

The UK’s financial regulator announced that it would soon open consultations on SPACs and introduce new rules by the summer.

London already has a reputation for producing soaring financial technology companies like Revolut and Monzo, both of which expanded into the US, and Wise (formerly Transferwise), which was valued at $ 5 billion last year. All three are so-called challenger banks that offer financial services via apps without the need for stationary branches.

The government clearly wants to build on this dynamic. It released an independent review of the fintech industry in February and is already acting on some of its recommendations, including setting up an express visa procedure for people interested in coming to the UK to work for fintech companies. The review also recommended a program that will bring regulatory blessings to small businesses experimenting with new fintech offerings and services.

As the UK prepares to host the United Nations Climate Change Conference in November, the government aims to transform London into a global hub for investors looking to spend their money on green and sustainable initiatives.

Mr Sunak has previously said that the Treasury Department will require large corporations and financial firms to disclose all climate change risks to their businesses by 2025 and is working on a taxonomy to define what really counts as “green”. Next, millions of pounds will be invested in new research centers to provide climate and environmental data to financial companies.

The government is also seeking to reclaim the lost ground in Germany, France and other European countries by issuing green bonds to fund projects to combat climate change.

London’s financial industry is in no danger of collapsing, but with Brexit, one of the cornerstones of the UK economy is no longer looking as impressive as it used to be. And as London tries to keep up with New York, it looks over its shoulder at the financial technology coming out of Asia.

The government has continuously billed Brexit as an opportunity to do more business with countries outside the European Union. This will be vital when international companies wonder whether they want to set up their European business in London or elsewhere.

When it comes to the future of the UK, it is “almost a look back at the future of London as an international center as opposed to an international and European center,” said Miles Celic, the executive director of CityUK representing the industry. “It doubles on international business.”

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