In January 1984, the UK’s biggest stock market index arrived at a time when traders still gave instructions over telephones. It quickly blew the FT 30 out of the water.
At the time, it brought innovation to the City of London but a financial crisis, Brexit, and a pandemic later – the index has come under fire for losing its allure.
In fact, much of the recent discussion around the FTSE’s anniversary has been criticism of the index for delivering poor price to earnings ratios and lacking representation in innovative, fast-growing sectors, and the comparisons made between the waves it first made in the 1990s, versus now.
But the debate needs to be bigger.
Analysis of ‘the Footsie’s’ recent headlines
What seems to be grabbing headlines and discussion in the city pages – and beyond, is a twofold question. Firstly, is listing on the FTSE 100 still regarded a reputation boosting move for companies and, secondly, how attractive is London as a destination for companies to list?
Criticism that the FTSE 100 has fallen victim to the pace of technology, something the UK more widely has been accused of falling behind on, contrasts with its international counterparts and the broader ambitions of the UK’s innovation strategy. In fact, many column inches in Bloomberg, The Guardian, Reuters, City AM and Motley Fool have opined on whether the best years of the index are behind it.
On the other hand, some City rainmakers suggest there are early indications that 2024 is the year for reinvigorated performance. For example, Raconteur acknowledges the cyclical nature of evolving indexes, while IG analysts and the FT point to a brighter outlook after a lacklustre 2023, if reforms and falling inflation come to bear.
Can high-growth sectors reverse the FTSE 100’s inflection point?
Currently, the combined value of its constituents totals around £1.9 trillion. For some companies, being included in the index stills carries merit, and can mean an instant lift from tracker funds that follow it.
For others, the FTSE 100’s somewhat sluggish returns compared to its international counterparts, such as the US’s S&P 500 and Europe’s Euro Stoxx 50, may be cause for reflection during tough economic conditions.
But valuations aside – less than thirty of the original 1984 cohort are still in the index. These include Barclays, Rio Tinto and Unilever, with other firms remaining in the index under different names.
As well as falling behind on innovation, a lack of technology companies listing has been a problem for the FTSE 100, with very few technology giants on the index. Years of consultations, reforms and regulatory tweaks hasn’t been enough to bring back high-growth companies including Arm Holdings. The Cambridge-based chip designer was bought by SoftBank in 2016, relisting in New York – testimony to how London may be losing its allure to its stateside competitor. Given that technology will continue to be one of the fastest-growing sectors for the next ten to twenty years, alongside sector evolution and M&A activity in energy and life sciences, London must think about the industries of the future, rather than resting heavily on a market made up of more traditional industries.
Once regarded as a barometer of the UK economy, 80% of the FTSE 100’s earnings are generated from overseas markets. Compare this to approximately 71% of S&P 500 revenues coming from the US, and it’s evident that the UK’s exchange is very much an international index – something it could lean into by re-invigorating its image.
Crafting IPO-grade corporate brand positioning
Despite lingering scepticism, the FTSE 100 does look to be one big-name float away from regaining its reputation as a competitive and innovative stock exchange once more.
Regardless of whether a business chooses London as a destination to list for financial and reputational gain, or seeks those spoils elsewhere, having a strong corporate communications strategy is a crucial component to attracting investment and cementing your brand’s strategic position.
Just as the FTSE 100 index and market is evolving, companies need to ensure their listing and commercial growth strategies are also evolving to include stakeholder communications, social media, and reputation management.
We’ve seen the commercial impact of social media time and time again, with Elon Musk first tweeting in August 2018, saying that Tesla would go private if its stock price reached $420, leading to a 7% rise. Increasingly, investors are also consulting social media and wider media sentiment when evaluating a current or prospective investment.
As such, a robust corporate communications and reputation strategy can ensure your media engagement reflects your company’s values and ambitions, and you’re leveraging announcements around listing, funding, and market movements effectively.
Your business’s next move
It’s an exciting time for the market right now, marked by changing investment styles and developing technology.
The mantra for 2024 is ‘move with the times’ and for businesses evaluating their investment strategies and company portfolio, this means taking proactive steps to position their brand’s latest market moves and company values ahead of the curve.
As the London Stock Exchange, and the FTSE 100 by extension, moves to enter a new phase – it is helped along with companies like high street retailer Boots, telecoms firm Viiz and digital bank Starling rumoured to be preparing UK IPOs in 2024. As cautious optimism builds amongst dealmakers, there are encouraging signs of the tide turning. And with this, a more dynamic media context in which to tell corporate success stories.
Clear, strategic communications can act as currency today.
