Anthony Hilton: Saudi deal sends out a seriously sleazy message

The head of the Financial Conduct Authority, Andrew Bailey, was similarly robust in a speech at Thomson Reuters earlier this month. “The UK has every reason to continue to put high standards into practice as our financial markets are an international public good,” he said. “This… should be a source of confidence that we do not intend to create a race to the bottom on deregulation. The stakes are simply too high in terms of the risks to our public interest objectives.”

What is interesting about these comments, however, is that even as those concerned were delivering them they must surely have been aware of the London Stock Exchange’s plan — since announced — to throw principle out of the window and create a special set of rules in a craven attempt to persuade the government of Saudi Arabia to choose London as the place to list its oil business Saudi Aramco.

The good news from the City’s point of view is that, if it happens, Saudi Aramco would be the biggest share listing the world has ever seen, so there would be a bonanza in fees. The bad news is that it is unfit to be a public company, because its structure cannot deliver the level of protection which outside investors should expect as of right. The interests of the business, the Saudi royal family and the Saudi state are as entwined and inseparable as a bowl of congealed spaghetti. Its standards of transparency and governance fall far short of what is expected and required for the protection of outside shareholders in every other major listed company. The 10% of shares to be sold to the public is far below the minimum threshold needed to deliver any semblance of protection and fair dealing towards those investors.

It is hard to believe that this flagrant bending of the rules would have been suggested in normal times. However, these are not normal times and the Government is desperate for anything it can find to suggest that London will continue prospering after Brexit. Ministers would be less than human if they did not want London to land the Saudi Aramco deal.

It is not the British way for politicians to give formal instructions to regulators who are, after all, supposed to be impartial. They don’t have to. The way it works is reminiscent of being an editor on a paper owned by Rupert Murdoch — he does not have to give his editors instructions because they know what he thinks is important and therefore what is expected of them if they want to stay employed. Indeed this is how it works in most areas of human endeavour: it is rare to find someone who can consistently ignore the wishes of his or her superiors and still stay in the job. Even star footballers get transferred.

But none of this serves to justify the decision of those who make the rules which apply to the listing of shares in London to create a special class of listing to accommodate Saudi Aramco. This is not just shameful prostitution of the City’s principles; it casually pulls the rug out from underneath 30 years’ working to persuade the world that regulation in the City was not for sale, that those with the deepest wallets could not buy special privileges. It is indeed reminiscent of American property mogul Leona Helmsley who, during her trial in 1989 for tax evasion, was revealed to have said: “We don’t pay taxes. Only the little people pay taxes.”

Let the word go out from London that henceforth only the little people have to follow the rules. That is the message of this decision.