I read this FT article and it prompted me to give thought to the big liquidity question. The perception of insufficient liquidity in London's equity markets has become one of the most significant headwinds facing the City as a premier listing destination. Whilst the fundamentals of the London Stock Exchange, robust regulatory frameworks, deep institutional expertise, and access to international capital, remain strong, the narrative of diminishing liquidity has taken hold amongst corporate executives and their advisers. 

This perception gap matters enormously: companies contemplating initial public offerings increasingly view liquid markets as essential not merely for successful flotations, but for maintaining investor interest and valuation premiums over time. When high-growth technology firms and life sciences companies opt for New York over London, citing concerns about trading volumes and analyst coverage, the perception hardens into measurable reality.

The consequences of this perceived liquidity deficit extend far beyond individual listing decisions, threatening London's ecosystem advantages that have historically attracted international issuers. Reduced IPO activity creates a vicious cycle: fewer listings mean diminished market vibrancy, which in turn discourages specialist investors and analysts from focusing on London-listed securities, further eroding liquidity. The departure of substantial companies to conduct secondary listings in New York, or worse, to delist from London entirely, sends a damaging signal to prospective issuers about the market's capacity to support ambitious growth stories. 

Meanwhile, institutional investors, armed with global mandates and benchmark-driven strategies, find it increasingly difficult to build meaningful positions in smaller-cap London stocks without moving markets, reinforcing their preference for deeper, more liquid alternatives.

Addressing this challenge requires more than regulatory tinkering, it demands a coordinated effort to rebuild confidence in London's capital markets architecture. Pension fund reform to channel domestic savings into UK equities, incentives for market-making in mid-cap stocks, and initiatives to enhance retail investor participation could all contribute to improved liquidity conditions. 

Yet perhaps most crucial is challenging the perception itself: London retains genuine strengths in sectors from financial services to natural resources, and for many international companies, particularly those with European operations or seeking patient capital, it remains an eminently rational choice. The risk is that pessimism becomes self-fulfilling, with policy-makers and market participants accepting decline as inevitable rather than marshalling the City's considerable resources to demonstrate that reports of London's demise as a listing venue are premature.