Governance experts have attacked recent reforms of the UK listing rules, claiming they have done little to increase the number of companies listing in London and failed to address the core issue of “liquidity” in UK markets.

The Chartered Governance Institute UK & Ireland, a professional body for company secretaries and governance professionals, says a survey shows that 53% of those polled expect net delistings from the London Stock Exchange (LSE) to continue over the next five years.

The results come after the Financial Conduct Authority reformed listing rules to soften the regulation around dual class shares and remove the need for shareholder approval of “significant transactions”.

Peter Swabey, policy and research director at the institute, says the stock market has declined because capital has sought out “more discreet” investment vehicles, such as private equity. Capital flight is also affected by capital adequacy rules and the low valuation of many UK stocks.

“The survey results,” says Swabey, “confirm our view that the FCA is on the wrong track with its recent stock market reforms. Business leaders are telling us the recent reforms will not fix the longstanding problems which affect the stock market.

‘Lowering the bar’

“The FCA’s reforms were counter-productive. They have removed important investor protections, whilst doing nothing to attract new listings. Does the FCA really think that allowing a host of low-quality companies to list in London is going to solve the problem of the all-share index underperforming the S&P 500?

“Rather than lowering the bar for new companies, the FCA needs to face the bigger issue: liquidity.”

The fate of the LSE has been hotly debated over the course of the past year, with City leaders talking up the need for higher chief executive pay and easier governance requirements. One City campaign body, the Capital Markets Industry Taskforce (CMIT), led by LSE chief executive Julia Hoggett, has called for a “reset” of UK governance.

Hoggett claims to have had some success in changing the debate of CEO pay and was successful in persuading the previous Tory government to cancel planned new reporting requirements.

In a recent speech, she said many changes had taken place to address the health of the UK’s capital markets.

“It is not only using and taking advantage of the reforms, however, it is also about facing them with optimism. We have a habit in this country of talking ourselves down—and often without good reason.”

The FCA defended its position this week saying it had acted to change its part of the investment “eco system” and reforms followed “extensive” engagement with both the buy and sell side.

A spokesperson says: “We undertook the msot far-reaching reforms of the UK’s listing rules in three decades because our regime has fallen increasingly out of step with those of other countries.

“While regulation is only one factor un supporting vibrant listed markets, our new rules aim to encourage companies to list and raise capital in the UK, increasing opportunities for investors and supporting national growth.”

The Chartered Governance Institute’s survey also found that almost half of business leaders (44%) believe the UK is over-regulated. It also found that 53% of businesses may be struggling to hire directors with the right skills because of media scrutiny on executive pay, and that proportion rises to 65% for the FTSE 100.