Chancellor Rishi Sunak is to set out plans to block companies from listing on the London Stock Exchange on national security grounds as government concerns mount about “dirty money” in British financial markets.
Sunak will launch a consultation within the next fortnight setting out proposals for a tougher regime governing flotations on the LSE, the Treasury said.
Decisions over the eligibility of companies to list in London are currently made by the UK Listing Authority, part of the Financial Conduct Authority.
Sunak is understood to want to beef up those powers by including a fresh assessment of national security considerations, which would be overseen by ministers and officials on the powerful National Security Council.
Ministers will insist that they have no particular companies or countries in mind. But MPs have raised concerns that the rules allowed Oleg Deripaska to list his energy company EN+ in an initial public offering in London in 2017.
Deripaska has been accused in the past of having close ties to Russian president Vladimir Putin — claims he has denied — and has been subject to sanctions in the US since 2018.
The House of Commons Treasury select committee said in 2019 that it was unreasonable for a body such as the FCA to recognise any potential national security threat on its own and block a listing.
The consultation will put forward proposals whereby the government could prevent a listing if it would give a foreign state access to state or commercial secrets.
Companies owned by people whose activities could harm UK interests could also be blocked from flotation in London.
The initiative was first put forward in a 2019 Treasury document called an “Economic Crime Plan”.
The Treasury said on Tuesday: “The UK’s reputation for clean, transparent markets makes it an attractive global financial centre. We are planning to bolster this by taking a targeted new power to block listings that pose a national security threat and will launch a consultation . . . in the coming months.”
Business leaders have warned that the move risks undermining attempts by ministers to present the UK, and the City of London in particular, as open for business after Brexit.
City bosses have been told that the new rules will be focused on key strategic areas such as technology, defence and national infrastructure.
But some fear over-reach by future governments. “There is a conflict here between to what extent the government is . . . interventionist and to what extent it’s free market, open doors,” one senior executive said.
In recent meetings, officials have sought to reassure executives that the powers will not be used freely. They say the new rules would not allow interventions such as the French government’s move to block the takeover of dairy manufacturer Danone by Pepsi in 2005.
But one broking chief said he was not sure what the government was trying to achieve with the new rules given already strict requirements covering areas such as money laundering and sanctions. “We are not going to get many IPOs from Belarus this month,” he said.
The move comes as the government pursues a drive to encourage more flotations in London. It recently commissioned Lord Jonathan Hill to conduct a review into listings to open the London market to more overseas companies.
The government is also considering waiving tough new audit rules for new listings to encourage companies to come to the UK.