Wednesday 25 November 2020 6:53 am

UK capital raising hits decade-high amid coronavirus crisis

The coronavirus pandemic has driven UK companies to raise the most money on public markets in a decade, with firms scrambling for cash returning to traditional fundraising methods, analysis shared exclusively with City A.M. has shown.

Listed companies have raised more than £26bn this year from London Stock Exchange’s (LSE) main and AIM markets, analysis by investment bank Goodbody showed. That is the highest total since 2009.

Read more: Rolls-Royce shareholders approve £2bn rights raise plan

UK companies have in recent years become less dependent on public markets for raising money. The rise of private equity contributed to the LSE losing 378 companies on net between 2010 and 2018, according to consultancy Oxera.

However, during the pandemic companies looking to quickly plug holes in their balance sheets returned to stock markets. UK authorities loosened the rules in April to help them to do so, boosting activity.

Goodbody’s analysis showed that consumer discretionary companies raised the most on the capital markets, at £11.4bn. The category includes travel, leisure, and car companies that have been hit hard by the pandemic.

Firms in the industrials sector raised the second-biggest amount, at £4.2bn. That includes jet engine-maker Rolls Royce, which has tapped markets heavily during a tough year.

‘Investors giving back’ to firms amid Covid

Piers Coombs, head of Goodbody in the UK, said: “In recent years, a rise of passive funds and a trend towards de-equitisation has taken the focus away from the vital role active investors play in keeping equity capital markets healthy for listed companies. 

“This year has firmly reversed that trend. And through institutional and retail investors giving their backing to companies at this difficult time, thousands of jobs have been protected and businesses can plan for the future.”

Read more: Intermediate Capital Group accelerates fundraising after ‘exceptional’ period

The consumer discretionary sector saw some of the biggest deals to date. That included FTSE 100 catering group Compass, which raised £2bn from both retail and institutional investors. British Airways-owner IAG raised £1.3bn.

However, not all companies raising money did so because they were struggling. UK-listed games services company Keywords Studios raised £100m in May for acquisitions, for example.