By Matt Cowie, consulting director at RSM UK
After several challenging years for London’s IPO market, there appear to be signs of a revival. Regulatory reform, a stronger pipeline of potential listings and renewed focus on growth companies have prompted optimism that UK technology businesses could help to drive a resurgence in public markets. The question is whether London can persuade its most successful tech companies to list at home, or whether New York will be the destination of choice.
There are certainly reasons for encouragement, with companies such as The Beauty Tech Group demonstrating that growth-oriented businesses can still attract investor support in London, while Monzo and Visma continue to feature in market speculation around potential future UK IPOs. At the same time, policymakers and regulators have recognised that maintaining the status quo is not enough if the UK is to compete effectively with the depth, scale and level of available funding of US capital markets.
Recent reforms have therefore focused on making UK public markets more attractive. The FCA has overhauled the Listing Rules, simplifying the transition to public markets and providing greater flexibility for founder-led businesses. More recently, changes have been made to remove restrictions on investment research during UK IPO processes, with the aim of improving investor engagement and increasing the flow of information available to the market. Alongside this, the latest AIM Rules reforms seek to reduce administrative burdens and modernise requirements for growth companies, reframing AIM as a ‘buyer beware’ market, where investors only invest if they fully understand the risk.
The UK remains well placed to develop and grow technology champions; the challenge is retaining these businesses. It has a deep technology talent pool with strengths in fintech, artificial intelligence, cyber security and software. London also offers international investors access to innovative businesses within a highly regarded legal and regulatory framework.
However, New York holds significant advantages: deeper pools of specialist growth capital, greater liquidity and, in some cases, higher valuation multiples. London’s challenge is therefore not only to make listing easier, but ensuring companies can access sufficient long-term capital.
That points to the broader issue of investment culture, as success cannot rely solely on regulatory reform. With substantial household savings still held in cash, initiatives such as the government’s “Savvy the Squirrel” campaign, designed to encourage retail investment, and wider financial education efforts are steps in the right direction, but the bigger prize is a stronger culture of long-term investment. Deeper domestic participation from retail investors and pension funds would strengthen liquidity, improve price discovery and help close the valuation gap with the US.
The Government’s temporary Stamp Duty Reserve Tax exemption for newly listed shares is welcome, but it is unlikely to be transformational on its own. To compete with New York, the UK needs sustained regulatory reform, greater pension fund investment in domestic equities and a broader shift in attitudes towards long-term investing.
London has momentum, a growing pipeline of prospective IPOs and a supportive reform agenda, but whether that becomes a sustained revival in technology flotations will depend on whether the UK can provide the capital, liquidity and confidence that ambitious technology companies need to thrive as public companies.