The state of the United Kingdom’s capital markets is perilous. IPO activity has fallen to its lowest levels in 30-years.
In the first half of this year, five listings reportedly raised just £160 million (around $215 million) below amounts as far back as 1995, according to data provider Dealogic.
London Stock Exchange has undergone several years of declines after reaching a post-Covid peak in 2021, when 142 deals raised a total of $26 billion. In contrast last year saw 16 deals that raised $3.5 billion figures by ION Analytics show, a decline of 87% from 2021 levels. Analysts say London’s lagging capital markets bring into focus the intense competition between leading financial centers.
UK equities trade at about a 50% discount to comparable US stocks, and the deep local pools of money that once supported London have shrunk, says Dat Ngo, a CPA and personal finance professional at Vetted Prop Firms. “That gap says liquidity is thin and domestic demand is weak—low turnover feeds the discount.”
Recent IPO defectors to New York include Wise, while Glencore’s cobalt unit has withdrawn its planned listing. However, despite concerns about the UK’s global standing, reforms such as updated listing rules and streamlined procedures are gaining traction to make its indexes more appealing.
But simplifying procedures in and of itself only offers a limited long term solution, Nik Colbridge, a partner at law firm Dentons, said. “For most issuers the comparison between venues will be based on predicted trade multiples, rather than the hoops that have to be jumped through to float.”
For London, the challenge is encouraging more active fund participation in markets still dominated by passive pension funds, Colbridge says. Legacy taxes—like the 0.5% stamp duty on each on-exchange purchase—continue to frustrate investors.
The UK’s 2016 decision to leave the European Union eroded London’s reputation as a preeminent investment destination, shifting interest to other European exchanges. However, in 2024, London reclaimed its status as Europe’s largest equity market, surpassing Euronext Paris
Although there is quiet optimism among investors that the UK is well on the way to overhauling its capital markets, it appears there is still a way to go.