London will enjoy a very strong year for stock market flotations, analysts say, arguing that both Brexit and coronavirus offer firms a unique opportunity to expand.
Various big-name businesses that have seen booming online demand from home-bound customers during Covid-19 lockdowns have revealed eye-catching plans for initial public offerings (IPOs) in recent weeks.
Clarity over Britain’s final departure from the European Union on January 1 acted as a catalyst for many companies to raise funds, according to specialists, while the rollout of Covid-19 vaccines also soothed investor concerns over the deadly pandemic.
So far this year, the celebrated shoemaker Dr Martens, app-driven meals delivery service Deliveroo and online greetings card seller Moonpig have all outlined plans.
– Confidence continues to build –
“Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market,” said Scott McCubbin at London-based financial services giant EY.
“An uptick in IPO activity may well intensify the competition for investment, placing greater emphasis on preparing early for IPO and raising profile with investors.
“Confidence continues to build with the Brexit deal now giving clarity around the future relationship with Europe and the rollout of Covid-19 vaccinations.”
Added to the mix, online money transfer specialist TransferWise has reportedly appointed banks to coordinate a planned float.
British media report that others could include insurer Canopius, EDF-owned electric vehicle charging business Pod Point, and online fashion retailer Very.
The IPO market has also attracted interest in recent years due to the easier availability of financing, alongside ultra-low interest rates.
– ‘Ideal for IPOs’ –
“Over the past few years we have also seen a strengthening in the financing available for UK and European companies in the early stages of their growth,” said Marcus Stuttard, head of UK primary markets at the London Stock Exchange.
“This means that there are now an increasing number of dynamic businesses at the stage and size of development that are ideal for an IPO.
“These factors coming together have contributed to the strong IPO pipeline we are seeing at the start of 2021,” he told AFP.
At the same time, investors have lots of cash, owing to low borrowing costs and several billion pounds worth of central bank stimulus funds.
London thus hopes to steal a march on rival IPO destinations such as Frankfurt, Hong Kong and New York.
Britain ranked only behind China and the United States in terms of the total amount of cash raised on the stock market last year, according to a recent EY study.
The British capital represented more than 40 percent of the total IPO amounts raised in Europe.
Brexit could deliver a further boost because the government wants to relax certain stock exchange regulations as it seeks to attract more big-name businesses to list.
The Brexit trade deal, which took effect on January 1, did not encompass the finance sector — but Britain and the EU aim to seal a memorandum of understanding about financial services by March.
The City of London Corporation revealed Friday in a study that the British capital still trails the United States and Hong Kong in attracting foreign company listings.
London now wants to compete more effectively against European rivals and EU officials are concerned it could dump highly-prized standards.
Catherine McGuiness, policy chair at the City of London Corporation, said: “The competitive strengths of London and the UK should mean that we are well placed to seize opportunities as we start a new trading chapter outside the European Union.”
