Rachel Reeves has been warned that hopes of a revival in UK stock market flotations this autumn could be derailed by Budget tax increases.
A bumper summer for the FTSE 100 index – which has enjoyed its best gains since 2016 – has lifted expectations of a raft of initial public offerings (IPOs).
That would cheer UK markets and the armies of lawyers and advisers in the Square Mile who have been starved of lucrative fees in recent years due to the dearth of public flotations.
Hope: A bumper summer for the FTSE 100 index – which has enjoyed its best gains since 2016 – has lifted expectations of a raft of initial public offerings
Julian Morse, co-chief executive of City broker Cavendish, is predicting an upturn over the coming months. But he said the Chancellor’s Budget could still wreck it if there was a tax raid on businesses.
He told The Mail on Sunday: ‘That’s the big unknown. If taxes rise substantially it will slow or stop growth. Any economy in a high-tax environment doesn’t do well. The IPO market is dependent on the economy. So if growth stalls and we go into recession that would be pretty negative.’
It comes as optimism grows that the UK stock market will see a resumption of listings in a revival of its fortunes after a dismal recent period.
Stock market debuts have been scarce in London and other financial centres while the value of UK firms has lagged foreign peers, especially in America.
Yet with US policy-making increasingly erratic under Donald Trump, UK and European markets now seem more attractive for investors. The FTSE 100 is up by more than 11 per cent this year and is outpacing Wall Street, though recent falls have seen it slip back from record highs.
London’s blue-chip index has been helped by a bumper performance over the summer when it defied the traditional adage of ‘sell in May and go away’, denoting a summer lull. Instead, the FTSE rose 4.7 per cent between the end of May and end of August, marking the best summer in nine years.
Morse said that around the time of Trump’s ‘Liberation Day’ tariffs in April, markets ‘suddenly realised the US is just not this really lovely, benign place to invest in’ after a long period which saw the American market ‘pulling money away from the rest of the world’.
He added: ‘That’s really fuelled the rise of the FTSE but also other global indices.’
Cavendish has launched four IPOs since December last year and is working on more.
Morse said: ‘We are actively working on four and are in conversation with another handful of firms that want to IPO. So it’s definitely a lot busier on the IPO front than for a long time, probably three or four years.’
Morse added: ‘It’s great news for the market. Because the markets are performing at the moment, people are getting decent returns – that fuels more investment into IPOs. I think we’re going to see a few high-profile ones this autumn. I’m quietly confident the market is going to be pretty strong, especially going into the new year.’
The bullish comments will add to the positive mood around the FTSE going into the autumn.
London has suffered a series of blows as companies such as fintech Wise up sticks for New York and others are taken over by foreign predators. And hopes that a bumper IPO from fast-fashion giant Shein have faded as it looks likely to head for Hong Kong.
But reports suggest other floats are heading to the City – with challenger bank Shawbrook, food giant New Princes and Norwegian software firm Visma among them.
City law firms are said to be stepping up efforts to hire staff with capital markets experience to prepare for an IPO bounce-back.
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