Downturn in City's Market as Initial Public Offerings Reach Record Lows
In a significant blow to the City of London, the first half of 2025 has seen the lowest number of Initial Public Offerings (IPOs) since 1999, with only five listings raising a mere £150 million. This dismal trend, which has been particularly evident in 2023 and 2024, has raised concerns about the UK's position as a global financial hub [1][3].
The causes of this slump are multifaceted. A significant "cliff edge" problem in scaling companies beyond early funding rounds due to fragmented capital deployment and a risk-averse investment culture compared to the US has been identified as a major factor [2]. Additionally, distorting institutional incentives such as delayed technology spinouts, tax sheltering strategies, and pension incentives that discourage investment in illiquid assets have contributed to the slow growth of companies towards IPO stages [2].
Other contributing factors include delisting and market shifts, with 88 companies either delisting or moving their primary listings away from the London Stock Exchange (LSE) in 2024, eroding the potential IPO pipeline [2]. Regulatory and political uncertainty have also dampened investor confidence, although recent reforms and increased political stability have begun to reverse this trend [1].
International competition, particularly from other European financial centres like Amsterdam, has further complicated matters [1]. The weakened market dynamism resulting from fewer IPOs potentially limits economic growth and entrepreneurial scaling within the UK [2]. Sustained low IPO activity has also contributed to subdued investor sentiment and capital flight risk [1].
However, there are signs of recovery. Planned listings from high-profile companies and reforms improving investor confidence suggest the market could rebalance, although the underlying structural challenges remain significant [1][2]. Notable developments include the City task force's encouragement of changes to the UK's listings regime and calls for measures to force British pension funds to invest more in the UK due to the LSE's woes [3].
Financial experts such as Simon French, chief economist at Panmure Liberum, suggest the Government should promote an equity ownership culture to address these issues [3]. LSE boss Julia Hoggett admitted that, despite these changes, they have not yet seen the real turning point in terms of risk capital within and into the UK [3].
The dearth of IPOs in the first half of 2025 is not unique to London, with other global markets also struggling. This has been further exacerbated by events such as 'Liberation Day' in April 2021 and April 2025, which saw a significant drop in deal flow in global markets [3]. Despite this, there are hopes for a resurgence, with tech firm Alphawave planning a £16 billion London IPO, marking a rare boost for the City [1].
However, the departure of fast-fashion giant Shein, which abandoned plans for a London IPO in favour of a Hong Kong IPO, is a cause for concern [3]. Similarly, Fintech Wise's announcement of its departure from London and plans to move to New York indicate a shift in the financial landscape [3].
In conclusion, the record low IPO levels on the London Stock Market since 1999 reflect deep systemic issues in investment culture and capital mobilisation, compounded by competition, regulatory hurdles, and past political instability. While early 2025 shows some recovery signs, addressing these root causes is essential for London to regain its leadership position in global equity markets [1][2][3].
Investors might find it challenging to explore opportunities in the business sector, given the risk-averse investment culture and the fragmented capital deployment issues that have hindered the growth of companies towards IPO stages in the UK's finance industry. The slow growth of companies towards the IPO stages is also influenced by distorting institutional incentives that discourage investment in illiquid assets.
