London maintains attractiveness for listings despite instability
The most important factor when weighing up where to launch a public listing are where a company’s headquarters are, and where its largest sales regions are. According to a new study, while New York subsequently remains the world’s most popular listing choice, London is not losing its lustre to business leaders.
Stability is a key ingredient when it comes to the success of any company. While shrewd investors might find volatile markets or crashes an ideal time for picking value stocks at bargain prices, in the long term, the idea that a market will return to ‘normality’ is a key ingredient for companies to sink capital into any geographical region. As such, London’s reputation as a hub of financial security has taken a bit of a hit in recent years.
In the wake of the Brexit vote that ultimately took the UK out of the European Union, the UK accounted for only 5% of IPOs globally between 2015 and 2020, with the number of listings down by about 40% from a peak in 2008. Many companies instead headed to New York – including chip designer Arm, which the government failed to convince to list in London rather than New York, despite being headquartered in the British capital city.
This has led Britain's markets watchdog to propose new rules to increase the attractiveness of the UK as a destination for listings. In late 2023, the Financial Conduct Authority (FCA) recommended a single entry point to simplify and speed up company listings in the market, in the biggest shake up of its kind in three decades to help London compete better with New York as well as EU centres in the wake of Brexit.
Contrary to all this, however, new research from KPMG contends that the UK hasn’t in fact lost its attractiveness in the eye of potential listings. According to the firm, the majority of European and UK equity capital markets (ECM) leaders still believe that large international companies see London as a destination of choice.
When asked where large international companies would consider listing, almost all of the senior ECM leaders surveyed 94% picked New York, followed closely by London at 86%, while 50% also selected Amsterdam. These three were also the venues of choice among larger international companies, according to the researchers – with 36% of them plumping for London, just behind 41% preferring New York, and ahead of the 22% who picked Amsterdam.
While the UK market does not seem to have stabilised notably – uncertainty continues to cloud the economic picture in an election year – this could be because the nation remains such a key trade hub. When asked what they felt were the top criteria for a listing, 22% of ECM leaders said they felt a company’s headquarter location would help dictate where they listed – in correlation with 20% who said they chose by where their largest sales region was. Located between the US and Europe, London remains a beneficiary of both markets to this end.
Looking ahead, this could mean that London’s listings scene could be just around the corner from a revival. To that end, KPMG found 91% of ECM leaders expect the UK IPO market to return to normal activity levels in 2025, while two-thirds believe that IPOs issued in the EMEA region in 2024 will be led by the Middle East, followed by Germany.
Aadam Brown, Head of Independent Equity Capital Markets Advisory at KPMG UK, commented, “While UK listing activity was muted in 2023 - as was the case across most of Europe – London has not lost its lustre. ECM leaders were slightly more conservative on predicting a return to normalised UK IPO market conditions in this year’s survey, but it does feel like we are heading to an inflection point. Better market sentiment and investor appetite will begin to shine through. It only takes a few successful IPOs of high-quality companies to turn markets around, and there is every reason to believe this inflection point will occur in 2024.”
