The research, conducted by EY, is based on detailed quantitative analysis and over 100 interviews and surveys of market participants including company founders, leaders of pre-IPO companies, leaders of publicly traded companies, investors, advisers, investment managers, and infrastructure providers.
The report is being launched at an event in Canary Wharf that will feature keynote speeches from:
- Andrew Griffith, the Economic Secretary to the Treasury and City Minister
- Sarah Pritchard, Executive Director for Markets at the FCA
- Tulip Siddiq, Shadow Economic Secretary to the Treasury
The event also includes a fireside chat between Lord Hill of Oareford CBE and Julia Hoggett, Chief Executive Officer of the London Stock Exchange.
This report aims to complement and inform existing and ongoing initiatives, such as those initiated by the Capital Markets Industry Taskforce (CMIT).
Current state of the UK’s capital markets
The research finds that the UK remains a top tier global capital markets centre and continues to attract global capital. Data also indicates post-IPO share performance on UK exchanges performed better than in the US between 2017 and 2021 and the UK has grown and attracted more technology companies than public discourse would suggest.
Challenges remain however, and market participants identified several areas where improvement was required
- Companies need more help to access UK capital markets. We must create the best possible environment for the businesses of the future to get the growth capital they need to scale and stay here in the UK.
- UK capital does not always reach UK companies. We need to begin a journey to reboot the nation’s culture towards financial empowerment. Everybody should have the opportunity to own part of UK PLC.
- Frictions remain in our system that stifle flows of capital and information. We must build on the excellent progress already made by regulatory and legislative reforms and continue to improve the plumbing of UK capital markets.
- Negative perceptions of the UK are too often influencing the decisions of founders and investors. We need to do better at celebrating success and championing entrepreneurship in this country by redefining how we showcase ourselves to the world. We must reinforce the UK as a destination of choice.
Recent reforms to UK capital markets and initiatives to support them have focused on legislative and regulatory changes. These contributions have been crucial, but the research identifies additional factors which impact decisions around listings and the deployment of capital that are equally important and require attention. The report makes recommendations grouped under four key themes, including:
- Address the structural challenges hindering UK growth companies
- Reboot the nation’s culture towards financial empowerment and entrepreneurship
- Continue to improve ‘the plumbing’
- Reinforce the UK as a destination of choice
The full list of recommendations can be found in Chapter 6 of the report.
Conor Lawlor, Managing Director of Capital Markets and Wholesale at UK Finance, comments:
The UK is incredibly fortunate to have all the raw ingredients and key pillars for successful global capital markets. The progress from the regulators and policy makers on reform to date has been fantastic in enhancing those fundamentals.
Our research however identified several areas that need to be addressed to arrest the negative trends that are developing amongst participants within our markets.
We need more UK growth capital to support our economy, better understand the benefits of taking risk for future reward; further improve the frictions in our markets through digitisation and begin to champion our entrepreneurs and celebrate our successes.
Axe Ali, EMEIA Financial Services Head of Private Equity & Venture Capital at EY, comments:
The UK is internationally renowned for offering high quality and deep capital markets and gold-standard governance, bringing numerous benefits to the local and global economy. However, as many traditional strengths are challenged by everchanging macro-economic and geo-political factors, and the needs of companies and investors adapt and evolve, we are at an inflection point of change.
There is clear momentum across the industry, and a need to collaborate and strengthen the global positioning of UK as a leading capital market. This research is an important step in understanding the challenges facing the market to inform future initiatives.
