London targets SPAC boom in Budget

London targets SPAC boom in Budget

This month’s UK budget prioritised increasing London’s competitiveness in the absence of an equivalence deal with the EU

Proposals to make it easier to list in London and a reduction in bank levies will increase the financial regulation divergence between the UK and EU, potentially complicating the route to an equivalence deal. Budget proposals which will help London to become a more attractive place to list are likely to be implemented before the end of 2021. Changes include:

  • Popular blank-check companies known as special purpose acquisition companies (SPAC) will be able to continue trading during a deal to acquire a business (previously trading was suspended to protect investors from price flux during the acquisition)
  • Dual-class share ownership to let founders retain voting power for 5 years (as used by US tech companies such as Facebook)
  • Outside equity for premium listings in London (providing eligibility for FTSE indexes etc) will be reduced from 25% to 15%
  • Research on small companies will be increased (MiFID II rules require portfolio manager to pay for research which has led to a decrease in the quality and quantity of research for small firms)

Hopes that the EU might offer some equivalence were raised when a financial services memorandum of understanding included wording about informal consultations on equivalence. France’s junior minister for EU affairs also indicated that there could be partial equivalence in the next few months. Although these Budget changes mean that the UK will start to diverge from the EU, this should not mean that equivalence will not be granted. Other third countries including the US have been granted equivalence with some divergence.