Election uncertainty to squeeze London IPO market again as listings slump to 13-year low
Elections in the UK and US are set to squeeze the initial public offering (IPO) market again this year after new floats in London cratered to a 13 year low in 2023, EY has said.
The London Stock Exchange saw just 23 new firms listing on the market last year, a 49 per cent slide from the 45 registered in an already quiet 2022, EY found in its latest IPO Eye report.
The final three months of the year saw no new listings on either the main market or the junior Alternative Investment Market (AIM) as the IPO market globally continues to feel the strain of rising inflation, interest rate rises and geopolitical tensions.
“The challenging macroeconomic conditions which drove a slowdown in overall M&A market activity in 2023 had a knock-on effect on IPOs, with a relative pause in activity towards the end of the year,” said Scott McCubbin, EY’s UK IPO chief.
“The stability of equity markets hinges on consistent conditions so whilst falling inflation and interest rate reductions may ease in the first half of 2024, the upcoming UK and US elections in the latter half might delay significant IPO activities until 2025.”
Both countries are expected to head to the polls in the second half of the year which will add to the uncertainty that has hammered equity markets globally.
London has been plunged into crisis over the past 12 months as regulators and politicians scramble to breathe life into the London Stock Exchange.
Over 100 firms left the market last year, with 40 of those companies picked off in deals from private equity firms and corporates. A slew of firms have also snubbed London to float across the Atlantic, including Cambridge-based chipmaker Arm.
The Treasury and Financial Conduct Authority are looking to revamp the rules around the market to tempt more firms into listing. Just before Christmas, the City watchdog confirmed it would push ahead with a rules shake-up that would merge the premium and standard segments of the market and do away with cumbersome rules that require firms to win shareholder approval for major deals.
Economic shocks triggered a slowdown in IPO volumes globally last year as the total volume of IPOs fell eight per cent and total cash raised fell by 33 per cent compared with 2022. In total, 1,298 IPOs raised $123.2bn last year.
While economic and political jitters were likely to dampen activity through the year, EY said that in the UK and globally, some “pent up demand” for listings may be released.