The future of UK equity markets

UK equity markets have entered a period of renewed optimism, bolstered by regulatory reforms, a rebound in IPO activity and a sharper focus on increasing institutional and retail investment in UK equities. We explore the major trends and developments influencing UK equity markets and look at what lies ahead for 2026.

Regulatory reforms and market competitiveness

London’s regulatory framework has been simplified by a series of targeted, de-regulatory reforms that have reduced friction for UK listed companies and put London ahead of many of its competitor markets. Changes to the listing regime introduced in July 2024 have bedded in well, with companies particularly welcoming the flexibility to enter into significant M&A transactions without shareholder approval. In January this year, long-awaited changes will be made to the public offers and prospectus regime which, among other things, will in principle make it easier and quicker for listed companies to do rights issues and other large secondary fundraisings (of up to 75% of their existing share capital) without having to publish a UK prospectus. Where the offer has a US element, additional disclosures will likely be needed to satisfy US investor expectations and manage liability risks – however this will be a missed opportunity for the UK if US practice continues to drive prospectus-levels of disclosure under the new rules. The prospectus regime changes will also simplify disclosures where a company offers its own shares in a takeover or other M&A transaction, giving a further boost to companies looking to use their shares as acquisition currency for M&A.

Market recovery and the return of IPOs

In the second half of 2025 investor confidence increased, and Q4 saw the first wave of significant UK IPOs in several years with listings by Shawbrook, Princes and Beauty Tech. Shawbrook’s IPO, a landmark listing on which we advised, was the UK’s largest IPO by market capitalisation since 2021 delivered a partial exit for the company’s private equity owners, Pollen Street and BC Partners. We expect to see more private equity-backed IPOs in 2026 as more successful listings give sponsors confidence to return to the public markets as a credible path to exit. Indeed, London has consistently demonstrated that it has large pools of capital available to support secondary fundraisings and sell-downs. In March 2025, Pfizer completed the last of a series of large-sell downs through which Pfizer and GSK sold over £14 billion of shares in Haleon in less than three years since its listing to fully exit their respective investments – each highlighting London’s strong capacity to support successful exit strategies by shareholders in UK listed companies.

In November the UK government announced a “stamp duty holiday” by introducing a new Stamp Duty Reserve Tax (SDRT) relief for newly listed securities to incentivise companies to list in London over rival markets. The relief exempts from the 0.5% SDRT charge transfers of company securities made within three years of listing on a UK regulated market. (Transfers of AIM company shares are already exempt.) Although the relief aims to address concerns raised by a number of financial technology companies as a perceived disadvantage to listing in London, its time-limited nature is likely to take the edge off an otherwise welcome incentive to attract more companies to list in the UK.

Living with the US

In September, AstraZeneca made headlines announcing that it would harmonise its share listing structure to enable investors to trade ordinary shares across the London Stock Exchange (LSE), Stockholm Stock Exchange (STO) and New York Stock Exchange (NYSE). However, AstraZeneca’s place of incorporation, listing, headquarters, tax residence, governance regime and takeover regulation will remain in the UK, and its shares will still qualify for FTSE UK index inclusion. Due to a quirk in the structure for US listings, its shares will trade without SDRT – even in London. While AstraZeneca stressed that the move is designed to increase access to US investors and does not signal a loss of confidence in the UK, it was inevitable that a decision by the largest company in the FTSE 100 to elevate its New York listing would raise questions around London’s attractiveness as a listing venue.

More widely however, the narrative of London-listed companies eyeing a move to the US is faltering and companies and sponsors are recognising that perceived differences in levels of valuation and liquidity between the UK and US diminish on closer inspection. When considering total liquidity in the UK market (using fully comparable volume data) and adjusting for available free float, liquidity in the UK is comparable to that in the US. In addition, the relatively poor record of UK companies moving their primary listing to the US suggests that such a move is only viable for the largest of companies with a very substantial presence in the US and, to be even eligible for inclusion in the S&P 500, a market cap of at least USD 22.7 billion.

In October, Texas-based AI data centre company, Fermi Inc, took the unusual step of seeking a secondary listing for its shares in London at the same time as a primary listing on Nasdaq. We expect the LSE to encourage other US companies to use a secondary listing in London to access a wider range of UK and global investors. London is a truly global exchange, with 64% of institutional investors in the FTSE All Share being international compared to a US market that is dominated by domestic investors. In 2026, the Transatlantic Taskforce for Markets of the Future is expected to publish a report on how to improve links between UK and US capital markets, and how to reduce burdens for companies seeking to raise capital cross-border.

Increasing pension scheme investment in UK equities

Over recent decades, UK pension schemes have dramatically reduced their allocations to UK equities in favour of global diversification, and the UK pension system now has a significantly lower absolute and relative allocation to domestic equities than most of its international peers.

There is wide agreement that encouraging UK pension schemes to allocate more capital to UK equities is a necessary part of efforts to revitalise UK capital markets, but opinions differ on how best to achieve this. Mandating a minimum investment in UK assets would be controversial, particularly with scheme trustees and their advisers, and could have unintended consequences. However, the UK government might use a stick and/or carrot to encourage schemes to invest a set percentage. While tax relief to incentivise greater ownership of UK equities is unlikely in the current political and economic climate, a less contentious approach would be to make “UK equities” the default option in defined contribution (DC) schemes, including auto-enrolment schemes. The forthcoming Pension Schemes Bill is expected to require new default arrangements to invest a prescribed percentage in “qualifying assets”, likely including UK equities. According to New Financial, setting a 20-25% UK equity allocation in default DC funds could increase investment in UK equities by up to £95 billion. The Bill will also accelerate the process of consolidating certain schemes into larger “megafunds”, enabling greater diversification and cost efficiencies in asset allocation.

Increasing retail investment

Companies doing an IPO or secondary fundraising are increasingly allowing retail investors to participate, and we expect this to continue in 2026. Shawbrook’s IPO included an offer to UK retail investors (with around 7% of shares sold in the IPO sold through the retail offer, raising approximately £25 million) and retail investors were invited to subscribe alongside institutional investors on most of the larger placings (£30 million or more) by Main Market companies in 2025.

To address some of the barriers to retail investment, the UK’s Financial Conduct Authority (FCA) plans to introduce new “Targeted Advice” rules later this year. These rules are designed to enable firms to provide targeted, but non-bespoke, advice without having to follow all the rules that apply to bespoke advice. The UK government is also keen to encourage individuals to invest more of their savings into equities: as part of the November 2025 Budget measures, the amount of money that can be saved tax-free each year in a cash ISA will from April 2027 be reduced from £20,000 to £12,000 for the under 65s, and a campaign to promote the benefits of equity investing has been promised.

AIM’s future remains uncertain

Although the Alternative Investment Market (AIM) has been successful over the past 30 years, recent market developments have gradually made it less compelling to companies and investors. The main challenge it faces is the lack of capital and liquidity, not burdensome regulation. As a result, more AIM companies are making the decision to move to the Main Market with a flurry of “AIM to Main” transfers in 2025 compared to previous years. In April, these issues will worsen when the rate of inheritance tax business property relief on investments in AIM shares reduces from 100% to 50%.

In response, the LSE has set out a roadmap for the future development of AIM. As part of this, deregulatory changes to the AIM Rules will be introduced later this year and the Exchange will seek to reposition AIM as distinct from the Main Market.

Private, public and PISCES

Private markets have grown in popularity as a source of capital for companies, but public markets continue to offer distinct advantages - such as greater liquidity, broader investor access and higher standards of governance and transparency. Recognising the need for more flexible liquidity options, the LSE will launch a new PISCES platform, the Private Securities Market (PSM) in early 2026. The PSM will allow investors to buy and sell shares in participating private companies at set intervals, providing a route to liquidity when an IPO or other exit is not immediately available. While a PISCES platform cannot be used to raise new capital, participating can help a company prepare for a future public offering. Although similar platforms are well-established in the US, we expect adoption in the UK to be gradual. Ultimately, both private and public markets play essential, complementary roles.

Outlook for 2026

These targeted regulatory reforms, the return of IPO activity and efforts to increase both institutional and retail investment are promising steps towards a long-awaited recovery. While challenges remain, a strong pipeline of prospective listings and ongoing UK political support signal a turning point that sets the stage for UK equity markets to rebound in 2026.