The London Stock Exchange has experienced a significant decline in new listings, with only two companies joining the market during the third quarter of the year. These firms collectively raised £64.8 million, marking an 82% decrease compared to the same quarter last year.

According to data from EY, the accountancy firm, there have been only ten new listings in 2023, totaling £584.6 million in raised capital, which is a 47% drop year-on-year.

Scott McCubbin, who heads EY’s IPO division for the UK and Ireland, noted that the third quarter is generally a sluggish period for new listings. He attributed the hesitation among businesses to proceed with stock market floatations to the upcoming October budget, concerns regarding interest rate adjustments, and inflation trends.

“As we move into the final quarter of 2024, we expect some recovery in IPO activity, although these may be pushed back to early 2025,” he stated. “Ongoing geopolitical challenges in Ukraine and new tensions in the Middle East add to the uncertainty, but the prospect of a stronger deal pipeline is encouraging.”

Globally, IPOs in the third quarter surpassed activity from earlier in the year, with 310 new listings that raised a combined $24.9 billion.

This reflected a 14% decline in total volumes compared to the same time last year, with proceeds falling by 35% according to EY’s analysis.

In contrast, regions such as the Americas and broader Europe, the Middle East, India, and Africa have maintained stable listing activity, experiencing digital growth in both the volume of deals and the capital raised compared to the previous year.

Meanwhile, the Asia-Pacific area saw a resurgence in the third quarter, with heightened IPO activity in countries like mainland China, Indonesia, Malaysia, and South Korea.

This year, the Financial Conduct Authority introduced the most significant regulatory changes for companies listed in London in three decades, aimed at revitalizing the UK’s capital markets.

London has faced challenges in attracting high-growth start-ups in the face of competition from New York. Notably, major UK firms like bookmaker Flutter and construction materials group CRH have relocated their primary listings to the US.

The new regulations empower company executives to make decisions without requiring shareholder votes, offering increased flexibility for firms to implement dual-class share structures often favored by founders and venture capitalists, providing them with enhanced voting rights over other shareholders.

According to EY, the artificial intelligence sector has emerged as a significant source of IPO activity, with over 60 AI companies going public annually in the past two years, approximately half of which have reported profitability. An additional 50 AI firms are currently preparing to file for IPOs.

Looking ahead, EY anticipates that a reduction in interest rates and declining inflation may stimulate new listings, particularly in sectors that are more impacted by borrowing costs.