Aramco float concessions could damage London reputation, says IOD

LONDON is at risk of damaging its reputation by giving oil giant Saudi Aramco an easy ride on to the stock exchange, one of Britain’s leading business groups has warned.

The Institute of Directors has echoed the UK’S investor community by warning the City watchdog that watering down rules to make it easier for state-owned companies, such as Saudi Aramco, to float in London could be damaging.

“We are concerned that, if implemented, the proposed changes could exert a detrimental impact on the reputation of the UK for sound corporate governance,” the IOD said in a letter published today.

Aramco is expected to be valued at £1.6 trillion when it floats next year and stock exchanges around the world have been fighting to get a slice of the biggest IPO in history.

As London vies to be the financial centre of choice, the Financial Conduct Authority has suggested creating a new category under its premium listing regime aimed at state-controlled companies. These businesses “tend to be different from private sector individuals or entities in both their motivations and their nature,” the FCA argued last month.

The regulator usually blocks a premium listing unless at least 25pc of a company is sold. However, even though the Saudis plan to sell only 5pc of Aramco, such a stake, if valued at £80bn, would itself be larger than most FTSE 100 companies.

Despite the fact it would draw tens of millions of pounds into the City, proposals to bend the rules have drawn much criticism. Stephen Martin, the IOD director general, called it “unjustified” and warned that it could create governance problems.

Changes to the listing rules must “enhance rather than diminish the UK’S reputation,” Roger Barker, the Iod’s corporate governance director, added. The FCA and London Stock Exchange declined to comment.