What Brexit means for the UK's IPO market

 
William Turvill
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PwC's Mark Hughes said “London is one of the world’s most international capital markets, and in or out of the EU will remain attractive” (Source: Getty)

Activity on London’s flotation market is expected to “largely cease” in the next year following the Brexit vote, according to an initial public offering (IPO) expert.

The IPO market in the UK and beyond has already slowed so far this year in the run-up to yesterday’s EU referendum.

And accountancy firms PwC and EY both expect the market to become less active following the UK’s decision to leave the EU.

Brexit Britain: What you need to know

However, one expert noted that “London is one of the world’s most international capital markets, and in or out of the EU will remain attractive”.

Scott McCubbin, EY’s UK IPO leader, said:

IPO activity can be expected to largely cease in the next 12 months. Increased uncertainty about the impact that the vote to Leave the EU will have on listing legislation, as well as the expected devaluation of the pound, is likely to hold activity back. One area of increased activity, however, could be from US and EU private equity funds looking to acquire assets in the UK, particularly if there is an impact on business valuations and a lower pound. Markets will be looking for signs of clear long term plans before confidence returns and activity picks up.

Read more: What Brexit means for UK M&A: Experts expect further drop in activity

Mark Hughes, capital markets leader at PwC, said:

The first half of 2016 has been challenging for IPO activity. Even with a burst of activity in May across the European IPO markets, proceeds from European IPOs are down around 64 per cent year on year, its lowest year-to-date level since 2013. London has dropped 50 per cent year on year and while IPO activity in the UK is likely to be much slower following the Brexit outcome, the wider European markets will likely fair better.

However, London is one of the world's most international capital markets, and in or out of the EU will remain attractive to new issuers seeking to raise finance and to global investors seeking new investment opportunities.

Private equity firm 3i noted a slow start to 2016 for IPOs, especially in the UK, in an interview with City A.M. But the firm said it expected a pick-up in activity after the referendum – no matter which way the vote went.

Chief executive Simon Borrows told City A.M.: “[Europe’s IPO market is] less impacted by Brexit but there will still be caution around that vote, I would think.

“IPOs are happening in continental Europe. I’m not sure how many are happening in the UK at this precise moment.”

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