City Regulator Proposes Changes to London Listing Rules to Stimulate IPO Market

The City regulator is taking steps to remove regulations that have introduced unnecessary complexity, risk, and cost to the initial public offerings (IPO) market. This initiative comes as part of a broader effort by the Financial Conduct Authority (FCA), led by Chief Executive Nikhil Rathi, to support the government’s pro-growth agenda. A recent consultation has been initiated to review the rules that govern IPOs, with the aim of making London a more attractive venue for companies seeking to list.

The FCA is particularly keen to lift a seven-day ban that restricts banks involved in an IPO from publishing research on the issuer until independent analysts have had equal access to management data. This rule, originally intended to ensure fair competition, has been criticised for failing to achieve its goal while simultaneously complicating the IPO process. Market feedback has indicated that these regulations have placed the UK at a competitive disadvantage compared to other international listing venues.

Recent changes by the FCA have already made it easier for companies to list on the London market. The regulator has removed the requirement for a three-year financial track record and reduced the minimum free float for shares from 25 per cent to 10 per cent. Other measures include eliminating the need for shareholder votes on significant acquisitions or disposals and investor approvals for related party transactions. These reforms are part of a broader strategy to enhance market dynamism and improve conditions for listings in the UK.

In a strong commitment to fostering economic growth, Rathi has expressed the intention to implement further pro-growth policies in 2026. The regulator aims to unlock capital investment, reduce regulatory burdens, and facilitate trade relationships. One key policy identified is the removal of the seven-day research waiting period, which Rathi believes could expedite IPO applications significantly.

Current conditions in the IPO market have seen a notable decline in listings, with 2021 marking a record year. The enthusiasm around IPOs had previously led to over 120 companies raising approximately £17 billion. Conversely, the previous year saw only 22 IPOs, generating a mere £2.1 billion. Various factors have contributed to this downturn, such as rising interest rates, tariff uncertainties in the United States, and concerns about valuations impacted by advancements in artificial intelligence and geopolitical tensions, notably conflicts in the Middle East.

Bankers had initially hoped for a resurgence in the IPO market this year, following the listing of the Princes Group and Shawbrook. Various issuers, however, have postponed their plans due to volatile oil prices. In a separate development, the High Court has approved Wise, a money transfer service provider, to transfer its primary stock market listing to America, while retaining a secondary listing in London. This highlights the pressures faced by the City as companies reassess the benefits of a UK listing.