The latest edition of the QCA & Peel Hunt Mid & Small-Cap Survey investigates the views of fund managers and small and mid-sized quoted companies on:
- The current de-equitisation trends on UK public markets and what can be done about it
- The impact of regulation and MiFID II on liquidity, research and broking houses
- How companies can thrive in these conditions
In 2019 there were just 10 IPOs on the AIM Market and the number of companies on the market shrunk from 923 to 863. The Main Market of the London Stock Exchange also reduced in size and saw just 26 IPOs.
The reasons for this de-equitisation trend are varied and UK political uncertainty and global trade tensions are a part of it, but much lies in the hands of UK policymakers and regulators to resolve. Regulations, such as MiFID II, have worked to reduce liquidity in small and mid-caps in recent years. This is something that previous editions of this survey anticipated and now the impact is being more clearly felt, with the inevitable consequence that the regulations have had a negative impact on smaller quoted company liquidity.
The findings of this report are based on surveys with 155 UK-based fund managers, and 110 mid or small-sized quoted companies. They tell us that
both the investors and companies on UK markets are worried about deequitisation and that action needs to be taken to reverse this trend and protect the UK world-leading public markets for small and mid-sized companies.
Actions are proposed in this report that the UK’s policymakers should pay attention to, including encouraging pension funds to take small stakes in growth companies and providing tax incentives for equity investment. In the long-term, a proportionate approach needs to be taken to all regulation in order to avoid situations like we have with MiFID II.
- 75% of companies & investors are concerned over the de-equitisation of UK stock markets.
- 60% of companies say burdensome listing requirements and excessive scrutiny is the main driver of the shrinking UK public markets.
- 79% of investors think MiFID II has had a negative impact on small & mid cap liquidity. This perception has significantly increased since 2017