UK Finance: Government must ‘unify’ market strategy
The relationship British businesses have with public exchanges such as the London Stock Exchange and private markets has transformed and requires a new strategy, a fresh report from UK Finance has said.
The financial services company, which serves as an industry body for banking, found a dwindling importance of public listings with firms staying private for longer. It said this had led to a “shifting” in the constructs of markets.
Its report, which was supported by EY, showed private capital markets were rapidly growing.
Venture capital had increased by 20 per cent per year on a compound basis, private equity by 11 per cent, and private credit by 43 per cent since 2013.
“The decision where to join public markets is now more nuanced,” the report said.
It highlighted that the market capitalisation of UK-traded companies had sunk by 17 per cent since 2013.
London Stock Exchange decline
Overall, 88 companies ditched the London Stock Exchange last year, including Paddy Power owner Flutter and tech darling Darktrace, whilst only 18 joined.
The report said: “A unified course of action, looking across public and private capital markets, needs to be taken now.”
The report proposed a tighter link between public and private markets, which could help explore new innovations and solutions to support growth and liquidity.
It added schemes such as the Private Intermittent Securities and Capital Exchange System (PISCES), would help better connect public and private markets and facilitate “smoother transitions” to public listings.
Collaboration could help to address financing imbalances
Amidst the government’s bid to “cut the red tape” blocking growth, UK Finance said regulatory reform should ensure the industrial strategy aligns with government initiatives.
The institution said the removal of the 0.5 per cent stamp duty charge on UK equity would help deploy capital and promote the efficient use of UK markets.
This follows rejected calls for Chancellor Rachel Reeves to scrap the fee in her Spring Statement.
UK Finance added the government can also help bolster growth through expanding support for businesses ‘spun-out’ from university research to help “fuel the next wave of UK success stories”.
Additionally, the firm said the establishment of regional hubs to help start-up CEOs navigate investor negotiations, commercialisation and UK tax incentives would help drive innovation across the UK.
Conor Lawlor, UK Finance’s managing director of global banking, markets and international affairs, said: “[The UK has] a world-class ecosystem of public and private markets, and a real opportunity to strengthen the way they work together to support the most innovative companies and national projects.
“By harnessing the full potential of private markets alongside public markets, we can ensure businesses of all sizes have access to the capital they need to scale.”
Axe Ali, head of private equity and venture capital at EY, said: “Closer public and private market collaboration could help to address financing imbalances across key UK regions and sectors, and ensure the UK’s most innovative, growing businesses can access vital capital.
“This will have a material impact not only on individual companies looking to scale, but on our economy as a whole.”