Competition for investment is set to intensify as UK IPO activity is predicted to surge in 2021

• Listing activity restarted in Q3 and continued at pace in Q4
• Follow-on activity was strong – the highest levels since 2009 and the aftermath of the financial crisis
• Growing prominence of tech IPOs plays to North West’s strengths

Thursday January 7, 2021: Competition for investment is set to intensify after the London Stock Exchange (LSE) closed last year with a flourish of activity, which is predicted to continue in 2021, according to EY’s latest market tracker IPO Eye.

After a subdued first half in 2020, in Q3 we saw the re-emergence of IPO activity, followed by a significant uptick in Q4. In the final quarter of the year, the main market had 17 IPOs raising £3.4bn (including a single issuance under the London Shanghai Stock Connect program raising £155m), compared with three in Q3 raising £3.3bn. Activity also accelerated on AIM with 10 IPOs in the quarter raising £192m, compared with three in Q3 raising £76m.

Mark Clephan, Partner for EY’s North Corporate Finance Team, said: “It’s promising to see 25% of total funds raised in 2020 attributed to technology IPOs. These are likely to become increasingly prominent with FinTech, Tech and BioTech sectors expected to be key growth sectors for the IPO market in the future.”

A recent report by Tech Nation found that Manchester is Europe’s fastest growing major tech cluster with investment growth of 277% between 2018 and 2019.

Mark Clephan continued: “As this momentum continues, I expect that we will see new IPOs from North West tech businesses over the next two years.

“Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market. 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 roll out of COVID-19 vaccinations.”

In total, 40 IPOs listed on the LSE in 2020 – 25 on the Main Market (including three via the London Shanghai Stock Connect program) and 15 on AIM – a total increase of 11% when compared to 2019 (36 listings). This brings total funds raised through IPOs last year – on both markets and all routes – to £9.4bn, representing a year-on-year increase of 31% from £7.2bn.

At the end of 2020, the LSE maintained its third position behind the US and Chinese markets for funds raised, both in the final quarter and in the full year to date. In addition, more than 40% of total capital raised by commercial companies in Europe in 2020 through IPOs was through the LSE, demonstrating its continued preeminence in Europe.

Follow-on activity was again strong in Q4 2020 with existing issuers raising circa £15bn, bringing the annual total to over £40bn – the largest total since 2009 in the aftermath of the financial crisis. Despite the return of lockdown restrictions, the appetite for IPOs is predicted to increase through 2021, although this may have the effect of pushing some IPOs back to later in the year.

Scott McCubbin, EY UKI IPO Leader, said: “Building on the momentum that we saw in Q3, the UK stock market has successfully weathered the challenges brought by COVID-19 and has bounced back in the final quarter of 2020. As well as IPOs, the markets have successfully supported existing issuers through some of the most difficult economic times in recent history, with more follow-on capital raised in the year since 2009.”