UK stock market on course for worst year in a decade as listings dry up

The UK stock market is on course for its worst year in a decade as listings grind to a halt amid soaring inflation and market turmoil.

Only eight initial public offerings took place on the London Stock Exchange (LSE) between July and September, raising just £565m, according to new research from EY.

This represented a decline of 76pc and 86pc respectively compared with the same period last year as spiralling inflation, the war in Ukraine and rising interest rates triggered a listings drought.

The weak performance means the London market is heading worst year in a decade and, while listings activity has fallen globally this year, the UK has experienced a much steeper slump than rival financial hubs.

The data will heighten fears that the Square Mile is continuing to fall behind cities such as New York, Shanghai and even Amsterdam in attracting new listings. There are also concerns that the weak pound could trigger a flurry of foreign takeovers.

EY’s Scott McCubbin said: “The London IPO market has experienced a challenging 2022. Ongoing geopolitical tensions and economic instability, compounded by inflationary pressures, have meant many businesses have delayed their IPO plans until they believe inflation has peaked and stability returns to the market.

“While the overall IPO outlook for the remainder of 2022 remains subdued, companies who may have paused their IPO are now re-evaluating those plans to ensure they can adapt to the new macroeconomic landscape and are ready for the recovery in 2023.”

It comes as ministers seek to unleash a deregulatory drive in the City to boost London’s global competitiveness in financial services.

In August, the chairman of the LSE warned that London will lose its status as a global financial hub and be downgraded to a middling “regional market” without a post-Brexit overhaul of City rules.

In a bid to boost the stock market, the City watchdog has also proposed scrapping the current premium and standard regime to lure tech companies to the UK.

Meanwhile Lord Spencer warned this week that stamp duty on share trading is holding back the London market.

The former Conservative Party treasurer, who held the position from 2006 to 2010, warned that taxes on share trading are denting Britain’s chances of securing star listings.

Mr McCubbin added: “There’s still a healthy pipeline of IPOs and… we are seeing IPO preparation levels starting to increase. We expect listing activity to rebound in 2023 once inflationary headwinds ease, and companies have the stability and predictability required to realise their long-term growth plans.”