Shell considers quitting London for New York

Shell is considering quitting the London Stock Exchange for New York in what would be the biggest blow to the UK’s struggling stock market so far.

Wael Sawan, the oil giant’s chief executive, said the company is looking at “all options” for its listing amid concerns it is under-appreciated by investors.

In an interview with Bloomberg, he said: “I have a location that clearly seems to be undervalued.”

His comments will spark fears that Shell, which is Britain’s most valuable listed company and worth around £180bn, could become the latest blue chip business to flee the London market.

Its departure would deal a major blow to investors that rely on dividend income from FTSE 100 companies, including tracker funds and pension schemes that support millions of retirees.

The FTSE 100 index has traditionally been dominated by oil and gas companies, as well as mining and commodity stocks.

But there are concerns that a growing focus on environmental, social and governance (ESG) measures among institutional investors is beginning to threaten that status, with some companies starting to defect to the US, the world’s largest oil producer.

Ashley Kelty, head of oil and gas research at Panmure Gordon, said Mr Sawan’s comments reflected a negative perception of oil and gas in Europe, where Shell has faced criticism from climate activists and some of its own shareholders for not investing more in renewable power.

The oil giant is also under pressure to close a valuation gap with US rivals such as Exxon Mobil and Chevron.

Mr Kelty said: “In New York, they [Shell] won’t come under the same amount of pressure around the environment and greenwashing - they will be allowed to get on with what they do.

“If they do go, it would suggest they want to row back on the renewable side even farther than they’ve admitted previously because [in Europe] they will get penalised.

“Americans are far more positive towards oil and gas than Europeans. They don’t see it as being the great evil that is perceived to be here, and the tax regime is more supportive.”

He added that the comments from Shell’s chief executive should also be seen as a “warning shot” to the UK government and Sir Keir Starmer’s Labour opposition, amid concerns about anti-business policies.

Labour has vowed not to raise corporation tax above the current 25pc level but has separately suggested it will introduce a “proper” windfall tax on oil and gas companies that is tougher than the Government’s existing energy profits levy. Sir Keir has also vowed to introduce a package of “day one” employee rights that have raised concerns among some businesses.

A decision by Shell to quit London’s stock exchange would be just the latest in a string of recent blows to the UK’s most important capital market.

Mining giant Glencore last year chose to spin off and list its coal business in New York rather than London, while its secondary listings went to Toronto and Johannesburg.

Any decision to shift Shell away from London would fuel concerns that Glencore could move its remaining listing to the US – an option that has already been mooted by analysts.

Rival energy giant BP, which is the fifth-largest company on the index, could also follow suit.

It comes as Shell looks to shift its business away from oil and gas towards greener sources of energy.

But its hybrid approach has risked alienating traditional investors focused on profits, while failing to appease more activist investors concerned about climate change.

Mr Sawan said he was focused on a two-and-half-year turnaround plan, which he dubbed a “sprint”, aimed at slimming down the company and boosting its valuation.

Shell is aiming to reduce operating costs by up to $3bn (£2.4bn) by the end of next year, lower its capital expenditure range to between $22bn and $25bn and target shareholder returns via dividends and buybacks of up to 40pc of cash flow.

The energy boss said the current undervaluation presented a “fantastic investment opportunity”, adding: “I will keep buying back those shares, and buying back those shares at a discount.”

But he pointed to the gap in valuation between Shell and its New York-listed rivals Exxon Mobil and Chevron and acknowledged the company may have to take more drastic action if that gulf is not resolved by the end of next year.

Mr Sawan told Bloomberg: “If we work through the sprint, and we are doing what we are doing, and we still don’t see that the gap is closing, we have to look at all options.”

Any decision to move Shell’s primary listing away from London would need to secure at least 75pc approval in a shareholder vote.

It comes only three years after Shell scrapped its dual listing structure, moved its headquarters from the Netherlands to the UK and ditched “Royal Dutch” from its name. At the time, the move was hailed as a vote of confidence in Britain.

Yet a string of disappointing initial public offerings and investor pessimism over the UK economy has sparked an exodus of companies across a range of sectors.

Chip giant Arm, building materials supplier CRH, Paddy Power owner Flutter and travel operator Tui are among companies to have abandoned London in recent months.

UK stock funds have been unloved for several years, suffering 34 consecutive quarters of net selling, according to Calastone. Another £823m left funds in March.