London drops to 23rd in IPO rankings

The rapid decline of London’s status as a global financial markets hub has been highlighted by its fall to 23rd place in a global ranking of IPO destinations. In the first nine months of the year, the London Stock Exchange saw just £184 million raised, a stark contrast to the approximately £17 billion raised in 2021. This makes 2023 the worst year for listings in over three decades. In comparison, the US has raised around £40 billion in the same period.

According to figures compiled by Bloomberg, London, once the premier listing destination in Europe, now trails behind Sweden, Spain, Switzerland, Turkey, Poland, and Germany, and is only slightly ahead of Greece and the Netherlands. The data also indicates a widespread listings drought across Europe, with Sweden being the only country to raise more than £1 billion.

Neil Wilson, UK investor strategist at Saxo, described the situation as a “desert” and likened London to a “car boot sale” with minimal secondary placements and small capital raisings. He emphasised the need for a “big bang 2.0” strategy to revitalise the City’s economic output and tax contributions.

The concerning figures emerge as more large-cap UK companies consider listing in the US to avoid lower valuations in the UK. This week, AstraZeneca, one of the UK’s most valuable companies, announced plans to “upgrade” its New York listing to access deeper capital pools. Earlier this year, fintech company Wise moved its primary listing from London to New York. Accountancy firm MHA, which raised just under £100 million in April, remains London’s largest IPO by deal volume this year.

There have been calls for pension funds to be required to have a “default” UK weighting to prevent the London stock market from entering a “doom loop.” A UK weighted default fund, with an allocation of 20-25%, if mandated for defined contribution pensions with an opt-out option, could inject an additional £76 billion into UK equities, according to projections from think tank New Financial. The think tank warned that without intervention, DC fund allocation to the UK could drop to 3.5% by the decade’s end, whereas full mandation could increase UK equities to around 12.4% of total funds.