After years of stagnation, senior partners say the U.K.’s capital markets are showing signs of bouncing back.
While this should mean more deals for London's biggest firms, some partners are cautioning that new global and structural challenges could temper London’s recovery.
Following a short-lived surge in market activity immediately after pandemic restrictions lifted around 2021, the U.K.’s capital markets have seen a drop in usage. According to EY, in 2023, the London stock market saw just 23 issuers listing. This was a 49% decline on the 45 recorded in 2022 and the quietest year on record since they started collating this data in 2010.
Then in 2024, a new record low was hit, with EY recording that only 18 companies debuted on the London Stock Exchange.
Brexit-related uncertainty, regulatory divergence from the European Union, and increased competition from U.S. and Continental European markets have all undermined confidence in London.
This decline was further illustrated by Arm Holdings decision in 2023 to list on the Nasdaq instead of returning to the London Stock Exchange, as well as by TUI Group’s 2024 move of its primary listing from London to Frankfurt.
Recent reforms aimed at simplifying U.K. listing rules, supported by advisers such as Latham & Watkins partner Mark Austin—who has held several key advisory roles—have helped make the listings process more streamlined and attractive, contributing to an uptick in market activity.
Mike Flockhart, managing partner of HSF Kramer’s corporate practice group in the U.K. and EMEA, told Law.com: “The market conditions are probably the most positive they’ve been for the last four years.
“As a result of the long fallow period, there’s a surfeit of good companies that are looking to come to market.”
Ashar Qureshi, managing partner of Fried Frank’s London office and head of the EMEA global transactions practice, was also cautiously optimistic.
“I think in terms of the recent deals, they’re the beginnings of a green shoot.”
Slaughter and May’s co-head of corporate, Richard Smith, was even more enthusiastic about market conditions: “There is much more activity in U.K. capital markets—the supposed decline of London as an attractive IPO venue has been seriously exaggerated.
“It remains by far the most attractive venue and largest pool of capital in Europe.”
After several difficult years following the post-COVID boom, Freshfields partner Tom Godwin, specialising in public and private capital markets, observed that major factors impeding London’s markets recently seem to be clearing up.
"In terms of reasons to be optimistic, a lot of those macro effects are easing, in particular inflation, interest rates more widely.
“The U.K. has had to come to terms with the impact of Brexit, but that is increasingly understood and priced in.
"All of that is very helpful, and that we have regulators and policy makers who are focused on growth and opening the market, and all of that is cause to be very optimistic.”
Patrick Sarch, senior partner in White & Case's global M&A and corporate finance practice and head of the U.K. public M&A practice, is optimistic that investor appetite is improving, but warned that regulatory reforms aren’t enough.
“They don’t themselves increase risk appetite, tax changes do, and the ones currently seemingly being considered are not conducive to equity investment," Sarch said.
Even with the potential for more deals to be done, Jonathan Parry, a White & Case partner in the London capital markets group, pointed out that emerging exchanges in places like Scandinavia, Poland, Dubai, and the UAE, are now capable of hosting enterprises that once would have come to London.
He said: “London can’t just sit here and expect to have inbound from those jurisdictions; it's a much more competitive landscape than it was.”
Qureshi empasised that London does face competition from new markets, but argued that this is not necessarily a new phenomenon: “I think, frankly, there’s a huge amount of naivety and lack of history about how important or big London was.
“It was always in a competitive situation, and the reality was that it never was an automatic.”
He added: “I think that while some of that competition has gone up, and I think that some of the local exchanges in the Middle East etc have done very well, I still think that as a transit destination; other than the U.S., London’s still the most important transit or transactional destination in the world."
London’s enduring importance on the world stage was also stressed by Smith: “London remains a global financial centre, the leading venue in Europe and the most credible capital market for truly international businesses.”
Still, a new source of uncertainty looms: the domination of AI. Multiple partners acknowledged the massive surge in AI investment and valuations pose potential problems.
Sarch said: “There is a risk that there's an AI bubble. This could all collapse tomorrow, this is a current situation. That's one of the biggest gaps in relative price to earnings ratios ever.”
Godwin suggested, however, that London’s relatively varied market structure may offer some protection: “The factors that drive the valuation and liquidity of the markets in the U.S., like AI, I think London benefits from being more diversified.
“It means it doesn’t experience the massive valuation upticks, but equally it's much more sheltered from the downside, the downswing of the volatility that comes from being reliant on those sectors if there is a bubble effect."
The knock-on effect of an AI market correction in the U.S. is not to be underestimated, however, Qureshi cautioned: “If people's incomes on the other side of the pond decline, or they go into a recession, or their markets collapse because the AI bubble collapses, what that means is that you and I and other people who tried to put their savings away, have less money.
“It’s going to affect all of us.”
Despite the unpredictability of capital markets and a shifting global economic landscape, partners remain cautiously hopeful that the U.K.’s capital markets really are bouncing back—though perhaps reshaped.
“We would all welcome a return to normalised activity levels,” Flockhart said.
Considering how market changes may impact future work for firms, he added: “We’ll all have to adapt to the changing market dynamic, but I think that will be a welcome challenge after what has been a fairly tricky few years.”
Nov 13
Deal Summary
