Portillo condemns market merger

Michael Portillo: Stock market merger will harm London

The Shadow Chancellor, Michael Portillo, says the planned merger of the London and Frankfurt stock exchanges needs amending urgently.

He said the proposals should be rethought before London Stock Exchange members vote on them in September.

As they stand, the proposals threaten London's position as a global financial centre

Michael Portillo

Three-quarters of the 298 brokers that own the London Stock Exchange must be in favour for the merger to go ahead.

Mr Portillo said: "We are deeply concerned about three specific areas of the merger proposals, and following extensive consultations over the last two weeks, we believe that this concern is shared in the City.

"As they currently stand, the proposals threaten London's position as a global financial centre.

"First, the higher rate of Stamp Duty on share transactions in the UK already threatens to shift business to the Continent.

Frankfurt stock exchange

"This problem would be accelerated by the plan to move trading in high-tech and new economy stocks to Frankfurt.

"Second, there are also regulatory concerns because the government's Financial Services Bill, currently going through Parliament, takes no account of this fundamental change to the way the City will operate.

"Third, the aim of doing all equity trading in euros - about which conflicting statements have been made during the last few days - is wrong and unnecessary."

Board meeting

The Deutsche Boerse supervisory board meets on Tuesday to discuss the merger plans amid strong objections in Frankfurt as well as London.

Both sides appear to feel that too much has been given up in order to secure a deal and the plan is looking increasingly unlikely to succeed.

Mr Portillo said: "The proposed merger of the London Stock Exchange and the Deutsche Boerse, with involvement from Nasdaq, may strategically be the right move to take, but the details are where the real problems lie.

"Given the difficulties with the current proposals, it is no wonder that many members of the Stock Exchange are now thinking that it would be contrary to their interests to vote for the arrangements as they stand."

If the plan is scrapped, it will be a huge embarrassment for the executives on both sides who agreed the deal.

The London Stock Exchange chief executive, Gavin Casey, stands to benefit from potentially lucrative share options if the new company floats.