Elections in UK and US will hit stock market, warns EY

ELECTIONS in both the UK and US will cast a shadow over the stock market this year and risk delaying a rebound in listings until 2025, EY has warned.

Investor uncertainty around the election results may force businesses to delay initial public offering (IPO) plans until the outcomes are clearer, according to a report by EY. That would push many listing into 2025, with Rishi Sunak signalling he plans to hold an autumn general election and US voters going to the polls in November.

Scott Mccubbin, who leads EY’S UK and Ireland IPO team, said: “The stability of equity markets hinges on consistent conditions, so while falling inflation and interest rate reductions may ease in the first half of 2024, the UK and US elections in the latter half might delay significant IPO activities until 2025.”

The forecast suggests another lean year for London, which suffered a slump in new listings in 2023.

Only 23 companies floated in London last year, down 49pc from the 45 listings the year before. It marked the worst year in more than a decade, as rising interest rates, inflationary pressures and geopolitical tensions continued to weigh down on deal-making. Although listings fell globally last year, London fared far worse than rival financial centres. There are persistent concerns that London is losing its attractiveness as a financial hub. Companies have been quitting the UK stock market in favour of the US and Europe, while major British companies like Arm have eschewed the London Stock Exchange (LSE).

No companies listed on either the LSE’S main market or the junior AIM market in the final quarter of 2023.

The amount of funds raised in London through IPOS sank 40pc to £953.7m last year, EY said.

The UK’S largest IPO last year was CAB Payments, which raised £291.5m in July. However, shares in the foreign exchange and cross-border transaction specialist have since lost more than 71pc of their value.

It is hoped Financial Conduct Authority proposals to simplify London’s listing regime will help boost activity.

Plans include creating a new category for secondary listings when companies have a main listing elsewhere, and relaxing rules around the disclosure of related party transactions.

Mr Mccubbin said: “It’s imperative that a careful balance is struck between reducing red tape and safeguarding investor protections.”