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IPO activity expected to surge in 2021 as confidence grows

Initial public offerings (IPOs) are expected to surge in 2021 following a flourish of activity on the London Stock Exchange (LSE) in the fourth quarter of last year.

According to EY’s latest market tracker IPO Eye, this will intensify competition for investment as business confidence grows following the Brexit deal and the rollout of COVID-19 vaccinations.

After a subdued first half in 2020, Q3 saw the re-emergence of IPO activity in the UK, followed by a significant uptick in Q4.

In the final quarter, the main market had 17 IPOs raising £3.4 billion while the AIM market saw 10 IPOs raising £192 million.

Mark Allcroft, strategy and transactions partner for EY across the North East and Yorkshire, said: “Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market.

“Confidence continues to build with the Brexit deal now giving clarity around the future relationship with Europe and the roll out of COVID-19 vaccinations.

“An uptick in wider UK IPO activity is positive for Yorkshire and North East-based businesses considering an IPO in the next year.

“However, pent up demand will mean greater competition for investors’ attention, in turn placing greater emphasis on preparing early for IPO and strategic profile raising with investors.”

In total 40 IPOs listed on the LSE in 2020 – 25 on the main market and 15 on aim – a total increase of 11 per cent when compared to 2019, which saw 36 listings.

Total funds raised through IPOs last year were £9.4 billion – a 31 per cent year-on-year increase from the £7.2 billion raised in 2019.

At the end of 2020, the LSE maintained its third position behind the US and Chinese markets for funds raised, both in the final quarter and in the full year to date.

Scott McCubbin, EY UKI IPO leader, said: “Building on the momentum that we saw in Q3, the UK stock market has successfully weathered the challenges brought by COVID-19 and has bounced back in the final quarter of 2020.

“As well as IPOs, the markets have successfully supported existing issuers through some of the most difficult economic times in recent history, with more follow-on capital raised in the year since 2009.”