Regulation is a word that often tends to trigger more apprehension than anticipation.

In the financial industry alone the Financial Conduct Authority's consumer duty rules have prompted plenty of upheaval across the space, while regimes such as Mifid II created a great deal of work and confusion. And yet regulatory changes are on the agenda again, and could create winners as well as losers.

There has already been much talk of what a Labour government means for portfolios, be it via taxes or even just in the form of how it moves sentiment for UK shares.

However a fresh government could also usher in a wave of new regulation in a bid to tackle various issues. That is most notable when it comes to housing, a key area of focus for the new Labour government.

The government’s planning and infrastructure bill aims to stop local communities from vetoing plans to build new houses and infrastructure, while also simplifying the process for approving big infrastructure projects.

On top of that, the government has pledged to build 1.5mn new houses over the course of this parliament, with housebuilding targets due to be introduced.

However it is not the only change on the agenda, and not all change is the result of the new government. Even before Labour’s sweep to victory politicians and regulators were attempting to make the UK stock market more competitive with its rivals and attractive to companies.

This has culminated in multiple initiatives, and most notably the government wants to encourage savers to invest more of their pension in UK equities.

And the FCA has introduced new listing rules for the London Stock Exchange as a way to “boost growth and innovation”.

These changes see institutional investors have enhanced voting rights, while also weakening disclosure requirements around significant and related-party transactions.

As such there is much change to contend with. This could create some good opportunities for the market, though there are risks of different ilks to contend with, too.

Callum Abbot, manager of the JPM UK Equity Core fund, is particularly enthusiastic about reforms to encourage greater pension investment in UK equities because he says it will also help solve the problem of the lack of companies listing on the UK market.

He says: "Currently UK pensions have a very small proportion of their assets in UK equities. This is in stark contrast to the vast majority of other developed countries' pension allocation, which typically have a much greater home bias.

"This would substantially increase the liquidity of the market and likely drive a significant re-rating. These two issues – liquidity and the low rating of the UK market – are two of the issues most commonly flagged as problematic for potential listing companies."

Home bias

The housebuilding sector has looked pretty beleaguered in recent years and, with both the UK market and economy looking a little healthier lately, the outlook seems to have improved. 

The FTSE 350 Household Goods and Home Construction index, which includes 32 UK-listed companies in the space from Barratt Developments to Crest Nicholson, Persimmon and even consumer goods name Reckitt Benckiser, was up by almost 14 per cent for 2024 as of August 28, FE data shows, with a good chunk of that gain having come since the UK election on July 4.

For investors the situation here is complex. Housebuilder stocks could benefit if we see a boom in building but it remains tricky to identify the winners.

As Laith Khalaf, head of investment analysis at AJ Bell, puts it: “The obvious beneficiaries should be housebuilders, but it remains to be seen whether those targets are met and how that impacts on margins.

“Pushing up demand for materials and labour could increase costs for housebuilders, and in theory more supply will dampen house price growth, if it is actually delivered.”

There are also questions of whether the increases do come through. However some of the broader regulatory shifts could lift the UK market more generally, if at something of a cost.

Strengthening the UK market

Much has been said about the problems of the UK in recent years. From CRH to Flutter, various companies have upped sticks and switched their main listing to regions such as the US as one way of almost automatically commanding a higher share price. The market has also proved alluring to executives, with the chief executive of LSEG famously calling for better executive pay in the UK last year.

The FCA’s overhaul of the listing rules – the biggest such change in three decades – should dispense with certain red tape, but there are concerns that it dilutes shareholder rights.

Tom Lee, Hargreaves Lansdown’s head of trading proposition, warned in July that a plan to remove shareholder votes on significant and related party transactions, for example, would do exactly that. “Making the UK an attractive place to list has to be balanced with rights for shareholders,” he said.

Abbot says: "In general the FCA should make listing easier, less costly and align London policies more closely with international competitors. At the margin these changes may encourage more IPOs.

"Other benefits are for those companies that are looking to execute significant deals that no longer require shareholder approval, a shareholder circular and appointment of a sponsor. This should allow companies to execute deals more quickly, be competitive with other, overseas, buyers and make deal-making less costly."

Meanwhile some organisations such as investor rights group Sharesoc have argued for other initiatives, including the removal of the 0.5 per cent stamp duty currently applied to the purchase of UK shares.

In response to a consultation on the last government’s proposal of a UK Isa, they argued that the removal of stamp duty on shares held in a UK Isa would give a ‘fillip’ to the vehicle, adding: “It will have minimal downside risk to the current tax take from stamp duty and will hopefully therefore be acceptable to Treasury.”

Ultimately the task of encouraging more companies to list in London is one that many have attempted in recent years but no one has cracked.

In 2021 then-chancellor Rishi Sunak successfully wooed Deliveroo to list in London but this does not seem to have ignited any major change.

So far in 2024 there have been four IPOs onto the main market of the London Stock Exchange. In the past 90 days alone there have been 10 onto the New York Stock Exchange.

But maybe this time things will be different.

david.baxter@ft.com