The UK’s stock market is facing a “slow erosion” that demands urgent government action, according to a new report from the Confederation of British Industry (CBI), published just days before Chancellor Rachel Reeves is expected to unveil reforms in her upcoming Mansion House speech.
The CBI’s Revitalising UK Public Markets roadmap highlights a worrying decline in the number of listed companies, falling liquidity, and reduced investor interest, especially in small and mid-cap firms.
This contraction threatens to undermine the London Stock Exchange’s position as a global financial hub and risks depriving British businesses of vital capital needed for growth and innovation.
Despite the Square Mile's historic status as Europe’s largest equity market and its second place globally after the US, it has seen a marked decline in initial public offerings (IPOs), with more companies delisting than joining.
The report notes that just 36% of the UK’s 500 largest firms are now publicly listed, with many opting for private ownership or overseas listings.
Meanwhile, UK institutional investors, including pension funds, have sharply reduced their exposure to domestic equities, from 45.7% in 1997 to just 4.2% in 2022.
The CBI calls for comprehensive reforms to rebuild confidence and channel more capital into the UK’s growth companies.
Proposals already mooted ahead of the Chancellor's set-piece include revisiting stamp duty and pension rules, expanding Individual Savings Accounts (ISAs), and creating a UK-focused investment fund to support scaling private firms and bolster IPO pipelines.
The British Business Bank is suggested as a natural manager for such initiatives.
With growing anticipation around Reeves’ Mansion House speech next week, all eyes will be on whether her address delivers substantive measures to reverse these trends.
The CBI stresses that a clear plan to direct investment into small and mid-cap companies is crucial, not just to restore confidence in public markets but to sustain the UK’s long-term economic competitiveness and innovation leadership.
Failure to act risks further weakening the public equity market, pushing promising businesses offshore and narrowing the UK’s growth stock base at a critical juncture for the nation’s financial and industrial future.