UK IPOs have fallen by more than 50% in the past year, from 97 in 2021/22 to 42 in 2022/23* as the impact of inflation and interest rate hikes deterred both companies and investors.
The value of UK IPOs across the Main Market and AIM fell by 71%, from £4.9bn in 2021/22 to £1.4bn in 2022/23*.
The last quarter saw only two IPOs in London, significantly lower than the 10 in Q2 2023. There was not a single IPO in London in either August or September of this year.
The Bank of England Base Interest Rate increased from 0.1% to 5.25% in the last two years. In response, many companies delayed their plans to list on public markets and wait until company valuations return back to previous levels to avoid a disappointing IPO.
However, signs suggest that an upturn in UK IPOs could be on the horizon. The recent fall in the UK inflation rate may mean interest rates are close to or have already peaked. UK CPI fell from 10.1% to 6.7% in the last six months, raising prospects that interest rates could be cut in 2024. This would incentivise many that had delayed an IPO to list on public markets in the near future.
IPOs across other markets have already started to rise as inflation rates have fallen. This month, the US IPO market had its best month since January 2022, raising $7.2bn, upon news that inflation had fallen to 3.7%, much closer to the Federal Reserve’s 2% target. Germany had its biggest IPO in 2023 this month – Schott Pharma AG – valuing the group at €4.1bn.
Colin Wright, Chairman and audit partner in our London office, commented, “While 2023 has been a tough year for IPOs, both in the UK and globally, next year is likely to be much improved as inflation continues to move in the right direction.”
“Some economists forecast rate cuts as early as Q1 2024, which would likely have a very positive impact upon public markets. UK investors are already becoming more optimistic, which will push up valuations.”
*Year-end is September.
**As of 28 September 2023.