FCA pledges reforms to reverse ‘significant drop’ in UK IPOs

Sarah Pritchard, executive director, markets, FCA. Sarah Pritchard, executive director, markets, FCA. Image credit: FCA

The UK’s financial regulator has shared plans to boost London IPOs and address “a significant drop in the number of listed companies in the UK since 2008.”

Sarah Pritchard, executive director of markets and executive director of international at the Financial Conduct Authority (FCA), said in a speech on Tuesday that the regulator will make better use of its powers to attract more UK public listings.

Pritchard, speaking at the UK Finance and EY: Capital Markets insights launch conference, reflected on the UK’s business strengths, noting how more than 3,000 fintechs were headquartered in the UK in 2021 – four times more than Germany or France.

However, she noted that the UK’s market share has receded against fast-growing powerhouses such as China and India, citing regulation as one of the factors businesses take into account when deciding where to list.

“We want to make the listing regime more accessible, effective, easier to understand and more competitive,” said Pritchard. “This will benefit both issuers and investors. We want to make sure that UK public markets remain an attractive and trusted place to list companies, to support growth and innovation.

“Our proposed reforms are bold but build on the changes we have made over recent years – they take into account what market participants have told us that they value in the current regime. While the reforms will make it easier for firms to list and for a wider range of companies to list, they will also lead to a shift in responsibility and increased risk for shareholders.”

The comments come just weeks after Cambridge-based microchip designing firm Arm filed to IPO in the US. The news was a particular blow to the UK market as it could become the biggest listing of the year, with a target raise of up to £8bn.

Arm was bought in 2016 by Japanese investment holding company SoftBank in a deal worth £23.4bn. At the time, Arm was listed in both London and New York.

An uneasy market

So, what is pushing businesses to turn their back on UK listings?

“Whether you should list your company in London will depend on a range of factors including the business goals, target market, funding needs and personal preferences,” Dr Anand Verma, founder and CEO of Expect.ai, told UKTN.

“London has a supportive ecosystem of startups, with some access to funding and a good pool of talent. However, more could be done here from tax breaks, hiring talent, university and startup collaboration and support, and apprenticeship programmes – especially in the AI, data and machine learning space – in order to hire and retain skilled talent.

“I also think investors don’t like taking risks on visionary entrepreneurs as much as they do in other major tech hubs such as the US, Israel and some other parts of the world. London needs to do more as the cost of living rises and unstable investor confidence.”

Merlin Piscitelli, chief revenue officer EMEA at Datasite, believes the FCA’s announcement is a move in the right direction for the UK listings market, but only time will tell if it’s enough to rejuvenate listings.

“The proposal to create a single, simplified listing category could enhance the UK’s status as an IPO market, especially as it would eliminate lengthy eligibility requirements, which can deter early-stage companies,” said Piscitelli.

“Listed companies and investors would also benefit, as it allows them to set their own risk appetite and terms. Yet, it’s too soon to tell if this will ignite a London IPO comeback. For the UK IPO market to truly rebound, investors must feel compelled by a breakthrough opportunity in a particular market, such as healthcare or technology.”