Cryptocurrencies serve as the primary support for Capital Raising figures in London appearing meager
The UK's capital markets have been facing a challenging year, as highlighted by Peel Hunt's latest podcast. The poor showing is primarily due to ongoing market volatility, geopolitical uncertainty, and persistent outflows from UK equity funds. These factors have driven investors away from UK strategies, with UK equity outflows reaching £6.3 billion in the first half of 2025.
One of the contributing factors is the cautious sentiment among UK investors, influenced by geopolitical risks and the uncertain global economic environment. This has led to a shift in investor preference towards European and North American markets, where better valuations and stronger performance are being observed.
The UK capital markets are also impacted by the broader global currency fluctuations, including the strengthening pound against the US dollar reducing returns on US assets, and mixed performance within UK sectors leading to uneven capital flows.
Despite these challenges, certain sectors and asset classes in the UK are showing signs of resilience. For instance, there have been positive inflows in fixed income and mixed assets, and ongoing overseas investment from Asia and the Middle East supporting the market to some extent.
In a recent development, Smarter Web Company, a firm mentioned, raised funds to buy Bitcoin. This trend of small-cap companies investing in Bitcoin could partially explain the decrease in transactions observed in the current period. The total equity raised so far in 2025 is less than half what it was last year, and the number of transactions is down by a third at 63.
Steven Fine, of Peel Hunt, stated in the company's latest podcast that a lack of long-term supportive shareholders has contributed to the poor showing in the market. He believes a few more deals like Coats and Hammerson's could lead to a market revival, but predicts it will likely happen in the second half of the second half of the year.
Notably, the seventh-biggest deal by value in the current period was significantly smaller than typical deals, indicating a potential shift in investment patterns. Brokers have changed their tone, moving from a focus on the "second half" to a more cautious "maybe next year."
Renewed shareholder confidence in listed firms' growth strategies is key to a market revival, according to Fine. The latest monthly capital markets report by Investec shows total equity raised in the UK stood at £810m in July, which is a decrease of more than 40% compared to the same month last year. The Investec report's prediction for UK IPO volumes has been revised from "second half weighted" to "second half weighted and 2026."
As the market continues to navigate these challenges, it remains to be seen how these trends will evolve and what impact they will have on the UK's capital markets in the coming months.
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