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The “ongoing viability” of London’s junior stock market would be threatened if the government removes business relief (BR) from its shares in next month’s budget, the exchange’s owner has warned ministers.

Sky News has obtained a letter sent by Dame Julia Hoggett, the London Stock Exchange (LSE) chief executive, to Tulip Siddiq, the City minister, which includes a stark alert about the potential impact on the Alternative Investment Market (AIM) of radical tax moves next month.

In it, Dame Julia expresses concern about “the current fragility of the market and this concern is shared by companies and fund managers across the market”.

AIM, which is positioned as the LSE’s international exchange for growth companies, has contracted from 819 companies with a combined value of £131bn at the end of 2020 to 704 companies now valued at approximately £76bn, according to Dame Julia.

Julia Hoggett, the chief executive officer of the London Stock Exchange. Pic: PA
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Julia Hoggett, the chief executive officer of the London Stock Exchange. Pic: PA

The LSE chief said removing BR from AIM shares – a fundamental part of the appeal of London’s junior market – “would remove a core source of capital undermining the market’s capital base and bringing its viability into question over the short to medium term”.

She added: “An announcement of the removal of BR in the budget is likely to result in significant market volatility as individual investors and IHT funds seek to liquidate holdings in companies that have been long-term beneficiaries of BR investment.”

And she warned: “Given the illiquid nature of smaller companies, we are concerned that this volatility would have a disproportionate impact on share prices across the market.”

Dame Julia’s letter amounts to the starkest warning to date from the exchange about the future of AIM, which has provided a model to other international exchange operators but which has been beset by concerns about a lack of liquidity and corporate governance issues at some of its companies.

“Given the concerted effort being made to improve the funding environment in the UK including the development of PISCES, we are genuinely concerned that the removal of BR and its direct impact on growth markets such as AIM would create a very negative perception about the government’s commitment to this agenda,” the LSE chief wrote.

Her letter to Ms Siddiq comes just over a month before Rachel Reeves delivers the first speech by a Labour chancellor for nearly 15 years.

Tulip Siddiq MP in 2019. Pic: Reuters
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Tulip Siddiq MP in 2019. Pic: Reuters

The new government has warned that the problematic economic inheritance it has been saddled with will lead to difficult tax and spending decisions.

Dame Julia is a key member of the Capital Markets Industry Taskforce, a joint government and industry body, and one of the City’s most respected figures.

She has played a pivotal role in advocating listing rule changes which have been approved by the Financial Conduct Authority in an attempt to improve the international competitiveness of London’s capital markets.

That drive has been spurred in part by the number of large London-listed companies – among them the gambling giant Flutter Entertainment – which have switched their primary listing to New York.

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The City has also missed out on a string of prized initial public offerings (IPOs), most notably that of the chip designer ARM Holdings, exacerbating fears of an inexorable post-Brexit decline in London’s standing as a financial centre.

Those concerns may, in part, be alleviated by a decision from the Chinese-founded online fashion giant Shein to list in London, although its flotation plans are proving to be contentious because of the company’s labour rights record.

In her letter to Ms Siddiq, Dame Julia said AIM had played “a crucial role as a source of equity capital for growth and development”.

She cited data showing that UK-based companies admitted to AIM contributed £35.7bn gross value added to UK GDP and directly supported more than 410,000 jobs in 2023.

“Furthermore, through their supply chain expenditure, these companies support a further 212,000 jobs and £18.6bn of GVA and are estimated to contribute £5.4bn in corporation tax,” Dame Julia wrote.

She also told Ms Siddiq that companies listed on AIM were geographically and industrially broad-based, were “more productive than the national average and have consistently generated four-times as much of their revenue from overseas exports, compared to private companies”.

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In her letter, Dame Julia also highlighted that smaller quoted companies had been disproportionately affected by recent outflows from UK-listed shares, with net outflows in three of the last four years.

“The package of fiscal incentives including EIS, VCT and BR are designed to address long-standing market failures to ensure companies can transition to the public market, raise capital, scale and stay in the UK,” Dame Julia wrote.

“Without these measures, investors would likely concentrate their investments in larger, more liquid companies, denying growth companies access to risk equity capital through the public markets.”

Dame Julia also said that more than 660 AIM-listed companies with a combined market capitalisation of about £73bn were eligible for business relief.

“Around 75% of these companies are smaller companies in the £0-£100m market capitalisation range – the category of companies regularly identified as otherwise being more susceptible to capital constraints,” she wrote.

“The availability of BR has been one of the few constant features of AIM.

“As a result, investment encouraged by BR has become a vital source of capital for AIM companies.

“Around £6.3bn of capital is managed by the largest AIM IHT funds.

“However, the total amount of capital allocated to AIM companies, where BR is a factor in the investment decision, is likely to be much greater.”

A spokeswoman for LSEG, the LSE’s owner, declined to comment.

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City veteran Kheraj in contention to chair banking giant HSBC

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City veteran Kheraj in contention to chair banking giant HSBC

Naguib Kheraj, the City veteran, has been shortlisted to become the next chairman of HSBC Holdings, Europe’s biggest bank.

Sky News can reveal that Mr Kheraj, a former Barclays finance chief, is among a small number of contenders currently being considered to replace Sir Mark Tucker.

HSBC, which has a market capitalisation of £165.4bn, has been conducting a search for Sir Mark’s successor since the start of the year.

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In June, Sky News revealed that the former McKinsey boss Kevin Sneader was among the candidates being considered to lead the bank, although it was unclear this weekend whether he remained in the process.

Mr Kheraj would, in many respects, be seen as a solid choice for the job.

He is familiar with HSBC’s core markets in Asia, having spent several years on the board of Standard Chartered, the FTSE-100 bank, latterly as deputy chairman.

He also possesses extensive experience as a chairman, having led the privately held pensions insurer Rothesay Life, while he now chairs Petershill Partners, the London-listed private equity investment group backed by Goldman Sachs.

Mr Kheraj’s other interests have included acting as an adviser to the Aga Khan Development Board and The Wellcome Trust, as well as the Financial Services Authority.

He spent 12 years at Barclays, holding board roles for much of that time, before he went on to become chief executive of JP Morgan Cazenove, the London-based investment bank.

HSBC’s shares have soared over the last year, rising by close to 50%, despite the headwinds posed by President Donald Trump’s sweeping global tariffs regime.

In June, the bank said that Sir Mark would be replaced on an interim basis by Brendan Nelson, one of its existing board members, while it continued the search for a permanent successor.

Ann Godbehere, HSBC’s senior independent director, said at the time: “The nomination and corporate governance committee continues to make progress on the succession process for the next HSBC group chair.

“Our focus is on securing the best candidate to lead the board and wider group over the next phase of our growth and development.”

Sky News revealed late last year that MWM, the headhunter founded by Anna Mann, a prominent figure in the executive search sector, was advising HSBC on the process.

Since then, at least one other firm has been drafted in to work on the mandate.

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Sir Mark, who has chaired HSBC since 2017, steps down at the end of next month to become non-executive chair of AIA, the Asian insurer he used to run.

He will continue to advise HSBC’s board during the hunt for his long-term successor.

As a financial behemoth with deep ties to both China and the US, HSBC is deeply exposed to escalating trade and diplomatic tensions between the two countries.

When he was appointed, Mr Tucker became the first outsider to take the post in the bank’s 152-year history – which has a big presence on the high street thanks to its acquisition of the Midland Bank in 1992.

He oversaw a rapid change of leadership, appointing bank veteran John Flint to replace Stuart Gulliver as chief executive.

The transition did not work out, however, with Mr Tucker deciding to sack Mr Flint after just 18 months.

He was replaced on an interim basis by Noel Quinn in the summer of 2018, with that change becoming permanent in April 2020.

Mr Quinn spent a further four years in the post before deciding to step down, and in July 2024 he was succeeded by Georges Elhedery, a long-serving executive in HSBC’s markets unit, and more recently the bank’s chief financial officer.

The new chief’s first big move in the top job was to unveil a sweeping reorganisation of HSBC that sees it reshaped into eastern markets and western markets businesses.

He also decided to merge its commercial and investment banking operations into a single division.

The restructuring, which Mr Elhedery said would “result in a simpler, more dynamic, and agile organisation” has drawn a mixed reaction from analysts, although it has not interrupted a strong run for the stock.

During Sir Mark’s tenure, HSBC has also continued to exit non-core markets, selling operations in countries such as Canada and France as it has sharpened its focus on its Asian businesses.

On Friday, HSBC’s London-listed shares closed at 946.7p.

HSBC has been contacted for comment.

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Bank shares take fright as budget tax hike is floated

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Bank shares take fright as budget tax hike is floated

Shares in UK banks have fallen sharply on the back of a report which urges the chancellor to place their profits in her sights at the coming budget.

As Rachel Reeves stares down a growing deficit – estimated at between £20bn-£40bn heading into the autumn – the Institute for Public Policy Research (IPPR) said there was an opportunity for a windfall by closing a loophole.

It recommended a new levy on the interest UK lenders receive from the Bank of England, amounting to £22bn a year, on reserves held as a result of the Bank’s historic quantitative easing, or bond-buying, programme.

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It was first introduced at the height of the financial crisis, in 2009.

The left-leaning think-tank said the money received by banks amounted to a subsidy and suggested £8bn could be taken from them annually to pay for public services.

It argued that the loss-making scheme – a consequence of rising interest rates since 2021 – had left taxpayers footing the bill unfairly as the Treasury has to cover any loss.

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The Bank recently estimated the total hit would amount to £115bn over the course of its lifetime.

The publication of the report coincided with a story in the Financial Times which spoke of growing fears within the banking sector that it was firmly in the chancellor’s sights.

Her first budget, in late October last year, put businesses on the hook for the bulk of its tax-raising measures.

Ms Reeves is under pressure to find more money from somewhere as she has ruled out breaking her own fiscal rules to help secure the cash she needs through heightened borrowing.

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Other measures understood to be under consideration include a wealth tax, new property tax and a shake-up that could lead to a replacement for council tax.

Analysts at Exane told clients in a note: “In the last couple of years, the chancellor has been protective of the banks and has avoided raising taxes.

“However, public finances may require additional cash and pressures for a bank tax from within the Labour party seem to be rising,” it concluded.

The investor flight saw shares in Lloyds and NatWest plunge by more than 5%. Those for Barclays were more than 4% lower at one stage.

A spokesperson for the Treasury said the best way to strengthen public finances was to speed up economic growth.

“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms,” they added.

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Controversial P&O Ferries boss Hebblethwaite to quit

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Controversial P&O Ferries boss Hebblethwaite to quit

The man dubbed “Britain’s most hated boss” for his controversial policy of sacking hundreds of seafarers and replacing them with cheaper agency staff is to quit.

Sky News can exclusively reveal that Peter Hebblethwaite, the chief executive of P&O Ferries, is leaving the company.

Sources said he had decided to resign for personal reasons.

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Mr Hebblethwaite joined the ranks of Britain’s most notorious corporate figures in 2022 when P&O Ferries – a subsidiary of the giant Dubai-based ports operator DP World – said it was sacking 800 staff with immediate effect – some of whom learned their fate via a video message.

The policy, which Mr Hebblethwaite defended to MPs during subsequent select committee hearings, erupted into a national scandal, prompting changes in the law to give workers greater protection.

Under the new legislation, the government plans to tighten collective redundancy requirements for operators of foreign vessels.

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In a statement issued in response to a request from Sky News, a P&O Ferries spokesperson said: “Peter Hebblethwaite has communicated his intention to resign from his position as chief executive officer to dedicate more time to family matters.

Peter Hebblethwaite gives evidence to a committee of MPs in 2022. Pic: PA
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Peter Hebblethwaite gives evidence to a committee of MPs in 2022. Pic: PA

“P&O Ferries extends its gratitude to Peter Hebblethwaite for his contributions as CEO over the past four years.

“During his tenure the company navigated the challenges of the COVID-19 pandemic, initiated a path towards financial stability, and introduced the world’s first large double-ended hybrid ferries on the Dover-Calais route, thereby enhancing sustainability.

“We extend our best wishes to him for his future endeavours.”

A source close to the company said it anticipated making an announcement on Mr Hebblethwaite’s successor in the near term.

A former executive at J Sainsbury, Greene King and Alliance Unichem, Mr Hebblethwaite joined P&O Ferries in 2019, before taking over as chief executive in November 2021.

Insiders claimed on Friday that he had “transformed” the business following the bitter blows dealt to its finances by the COVID-19 pandemic and – to some degree – by the impact of Britain’s exit from the European Union.

A union protest is shown at the height of the mass sackings  row in 2022
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A union protest is shown at the height of the mass sackings row in 2022

P&O Ferries carries 4.5 million passengers annually on routes between the UK and continental European ports including Calais and Rotterdam.

It also operates a route between Northern Ireland and Scotland, and is a major freight carrier.

The company’s losses soared during the pandemic, with DP World – its sole shareholder – supporting it through hundreds of millions of pounds in loans.

Its most recent accounts, which were significantly delayed, showed a significant reduction in losses in 2023 to just over £90m.

The reduction from the previous year’s figure of almost £250m was partly attributed to cost reduction exercises.

The accounts also showed that Mr Hebblethwaite received a pay package of £683,000, including a bonus of £183,000.

“I reflected on accepting that payment, but ultimately I did decide to accept it,” he told MPs.

“I do recognise it is not a decision that everybody would have made.”

The row over his pay was especially acute because of his admission that P&O Ferries’ lowest-paid seafarers received hourly pay of just £4.87.

Mr Hebblethwaite had argued since the mass sackings of 2022 that the company would have gone bust without the drastic cost-cutting that it entailed.

The company insisted at the time that those affected by the redundancies had been offered “enhanced” packages to leave.

Last October, the then transport secretary, Louise Haigh, said: “The mass sacking by P&O Ferries was a national scandal which can never be allowed to happen again,” adding that measures to protect seafarers from “rogue employers” would prevent a repetition.

“This issue has been ignored for over 2 years, but this new government is moving fast and bringing forward measures within 100 days,” Ms Haigh added.

“We are closing the legal loophole that P&O Ferries exploited when they sacked almost 800 dedicated seafarers and replaced them with low-paid agency workers and we are requiring operators to pay the equivalent of National Minimum Wage in UK waters.

“Make no mistake – this is good for workers and good for business.”

The minister’s description of P&O Ferries as “rogue”, and suggestion that consumers should boycott the company, sparked a row which threatened to overshadow the government’s International Investment Summit last October.

Sky News’s business and economics correspondent, Paul Kelso, revealed that DP World had withdrawn from participating in the event, and paused a £1bn investment announcement.

The company relented after Sir Keir Starmer publicly distanced the government from Ms Haigh’s characterisation of DP World.

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