Trump tariffs 'could boost UK IPO activity' and international investment
Updated:
Investment bank Cavendish sees improved fortunes for the City this year, with more companies listing in London and international capital lured back by volatility in the US.
The broker told shareholders on Friday it has a 'solid pipeline of transactions in train' including 'further IPOs' (initial public offerings), after just 16 new companies listed on the exchange last year, falling from 20 in 2023 and 42 in 2022.
Cavendish's co-chief executive John Farrugia told ministers in January that the Government's current reforms designed to revive the City do not go far enough, arguing Britain should offer tax breaks to encourage companies to list in London.
More and more promising start-ups are being swooped up by private equity buyers, while many firms are opting to stay private for longer or list on rival exchanges.
Critics point to weak valuations, driven by severe UK equity fund outflows, as well as poor liquidity and trading volumes at the smaller end of the market cap scale.
Cavendish said on Friday: 'Well publicised challenges persist for the UK public markets.
'But with our chair's recent appointment to the Capital Markets Industry Taskforce , we remain central to the increasing number of stakeholder voices advocating for the policies and initiatives required to revitalise investment in UK small and medium-sized UK companies.'
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City excitement over potential IPOs this year include fast fashion giant Shein and Boots – if new owner Sycamore can be persuaded to pick London for a listing of the high street chemist and retailer.
However, the year has not got off to a good start with just four floats in the first quarter, according to AJ Bell data.
By comparison, there were more than three times as many takeover situations during the period.
Cavendish also told shareholders it was 'cautiously optimistic' that sentiment towards UK and European equities 'may finally be turning' after 'a challenging period'.
It said President Donald Trump's tariff policies and government spending cuts 'have heightened US recessionary risks' just as US equity valuations are at historic highs, with 'extreme concentration of capital in the largest US tech firms'.
Cavendish said: 'These risks to US equities have begun to prompt a reappraisal of diversification, driving a rotation from the US to European and UK equities.
'Whilst this rotation will initially favour the largest and most liquid European and UK stocks, history suggests that any incremental asset allocation to UK equities will ultimately flow through to smaller and mid-cap companies, especially given their attractive valuations.
'We believe that a combination of increasing diversification and the compelling valuation of the UK small and mid-cap sector will create significant opportunities in the year ahead.'
It came as Cavendish told shareholders it expects to report revenues of £55million for the year to 31 March, having been profitable in both halves of 2024.
The broker said: 'As a leading UK small and mid-cap investment bank, Cavendish is ideally positioned to benefit both from this change in sentiment and the ongoing momentum in private markets and will do so from a position of balance sheet strength.'
Cavendish shares were up 1.2 per cent in early trading to 8.75p.
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