After the Financial Conduct Authority (FCA) last week announced changes to the research requirements for UK initial public offerings (IPOs), the country’s regulation of equity capital markets is more competitive.
Now, the government must tackle a more complex task: getting companies to want to use them.
The UK has spent years rewriting the rules of its equity markets to address the concerns of participants.
In 2024, it made the rules for listed companies less restrictive. Earlier this year, it raised the threshold for a listing to require a prospectus, making the process of raising capital less expensive and cumbersome. The new listing regime removed shareholder votes for many significant transactions and introduced greater flexibility over enhanced voting rights, while the new prospectus regime reduced the regulatory cost of issuing equity.
And last week, the FCA changed the rules around research for IPOs. Firms no longer have to wait seven days between publication of an approved registration document or prospectus and connected research. Banks publishing connected research also no longer have to provide unconnected analysts with the same information as their own analysts.
Market participants told GlobalCapital that these changes put the UK in a better position to compete with other markets, since companies can be more agile when planning IPOs, will be less burdened once listed and can more easily raise capital in follow-ons and later raises.
But regulation can only take things so far.
Peel Hunt counted just six UK IPOs of companies worth more than £100m in 2025, whereas there were 41 takeover bids for companies above the same threshold. Across 2024 and 2025, 86 companies worth £87bn left the market through M&A.
The removal of regulatory obstacles cannot create the investment needed to reverse that trend.
UK defined contribution pension funds invest only 4.9% of their assets, around £33bn, into the country's equities, according to New Financial, a capital markets think tank. Ministers have made some moves to redirect domestic savings into UK assets, but so far the strongest measures were targeted at private markets.
Under the Mansion House Accord, 17 major pension providers have committed to put at least 10% of their main default funds into private markets by 2030, including at least 5% in the UK. The Pension Schemes Act 2026 has meanwhile encouraged consolidation into larger funds and allows the government to dictate a higher allocation into certain assets if voluntary contributions are deemed insufficient.
Reviving the UK's listed markets may require similarly ambitious action.
Some have argued the government should turn to further mandation, forcing funds to allocate to UK equities. New Financial estimated that this could more than quadruple the roughly £33bn that defined contribution pension funds invest in UK equities.
But this approach could be hard to justify, particularly as it means funds managing UK pension savings are less agile and able to allocate to generate the best returns for their customers.
Rather than mandation, New Financial said the government could make a fund with a UK weighting of 20%-25% of its equity allocation the default for defined contribution pension savers, while also allowing them to opt out. New Financial estimated this could raise investment in UK equities by up to £95bn.
The government will have to decide how far it should intervene with the investment of people’s retirement savings. Neither option is without political cost.
The same applies to the options for attracting companies toward listing in the first place.
The government could use tax incentives to make public ownership more attractive than the private alternative, investment bank Peel Hunt has argued. The UK is already exempts shares in newly listed companies from stamp duty reserve tax for their first three years after listing, but Peel Hunt argued it could go further.
The government could make VAT on IPO costs, which Peel Hunt estimated would work out to around 5% of funds raised, recoverable, or make IPO costs tax-deductable, similar to measures used in Poland and Italy. Listed companies could receive corporation tax incentives, while entrepreneurs and employee shareholders could be given preferential tax treatment.
Each decision would, however, have to be explained to the electorate. With the country’s fiscal resources so scarce, it will be difficult to explain why, for example, private equity sellers of a company —barons, if you will, in the tabloid parlance — should get preferential treatment because they choose to list at the expense of say, the NHS, when they already benefit from carried interest and at a time when the tax burden in the rest of the country is at its highest in decades.
But difficult does not mean impossible.
Whole-economy investment averaged 17.3% of GDP between 1997 and 2025, the lowest rate in the G7, according to the House of Commons Business and Trade Committee. To match Japan, which was the G7’s highest-investing economy, the UK would have to find another £180bn-£200bn of investment every year.
Public equity markets cannot fill that gap alone, but they are an important mechanism for turning savings into productive capital.
A study commissioned by the London Stock Exchange found that UK companies on its Alternative Investment Market (AIM) generated £68bn of gross value in 2023 once their supply chains and wider economic effects were included, as well as paying £5.4bn in corporation tax.
The government will need to make the argument that the public will also benefit from a more vibrant UK equity market and that the spoils do not accrue in their entirety to those in the City and the country's boardrooms.
The country’s public equity markets have been primed for greater use. The arena is built; now the government needs to get punters through the doors to play the game.
It will be a tougher task than tweaking the rules. But participation in this game is the only way it can be won.