IPOs set to rise as ‘political dust settles’

Richard Harding, partner and transaction advisory services leader for the North at EY
Richard Harding, partner and transaction advisory services leader for the North at EY
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The number of companies making their stock market debuts is expected to rise this year, as the “political dust” settles on both sides of the Atlantic, according to a senior figure at professional services firm EY.

Analysis by EY of IPO (initial public offering) listings in the UK suggests that uncertainty around the EU referendum and the subsequent decision to exit the EU had a “significant impact” on the UK IPO market in 2016.

EY’s IPO Eye report concluded that 2016 got off to a slow start, as the first half saw some companies delaying their IPO plans ahead of the referendum.

An EY spokesman said: “The leave vote ensured this uncertainty carried on into the second half of the year, with a marked further reduction in deals and particularly the level of capital raised, making 2016 the slowest year for UK IPOs since 2012. An uplift in activity however is expected in 2017.”

Overall there were 64 IPOs in 2016, with seven in the North of England, EY said. There were 62 UK IPO listings in 2015, with 10 listings in the North of England.

Half of the North of England’s IPOs in 2015, were on the main London Stock Exchange, according to EY’s research.

Richard Harding, partner and transaction advisory services leader for the North at EY, said: “While the volume of IPOs has remained roughly stable compared to 2015, we saw smaller listings coming to the market this year.

“All listings in the North of England in 2016 were in the AIM market. This is mainly due to the number of private equity backed businesses coming to market being much smaller than usual, and currency instability.

“Currency fluctuations have meant IPOs have continued to have to price themselves at the lower end to attract investors. This low price point has led to a number of potential IPOs being withdrawn from the market, and is the main cause of the lack of activity. Looking ahead, once the political dust settles on both sides of the Atlantic, we are likely to see an uplift in activity in 2017, and we are already seeing strong evidence of this in our pipeline in the first two months of this year.”

Stuart Thwaites, from EY’s transactions team, said there were definitely some positive headwinds in support of potential IPOs, although he acknowledged that there was a long road ahead before there was more certainty over Brexit.

Global markets have scaled record heights this week, as investors have been cheered by US President Donald Trump’s pledge to slash taxes and unleash an infrastructure spending spree. Mr Trump struck a less confrontational tone during his speech to Congress on Tuesday, vowing to reform taxes, slash red tape and ramp up spending on defence and infrastructure projects.

The FTSE 100 Index is also enjoying an uplift from the collapse in the pound, which took a substantial hit after the US dollar strengthened on market speculation that the US Federal Reserve could hike interest rates at its meeting on March 15.

Sterling’s slump since the Brexit vote has proved beneficial for multinational companies listed on the London market as many tend to benefit from earnings in currencies, such as the US dollar, which are performing better than the pound.

Earlier this week, Jasper Lawler, a senior market analyst at London Capital Group, said stocks in line to benefit from Mr Trump’s proposed spending splurge were pushing the markets higher.

He added: “By bringing Congress on side, Trump’s plans to ‘restart the engine’ of the US are a lot more likely to become policy.”