London’s stock market is predicted to face further contraction in 2024, driven by increased takeover activity

The UK Tech market, valued at $1tn, ranks as the third largest globally, trailing the USA and China, with the EU making significant strides in H2 2023.

Despite the excitement generated by AI, as highlighted by Claire Trachet, Founder of business advisory firm, Trachet, the UK faces the risk of lagging behind other European countries, particularly France, which has attracted substantial investment.

Challenges include declining participation in Horizon, reduced R&D relief, and a need for the government to commit resources to ensure competitiveness. The call for a dedicated entity to envision the future of the UK tech sector in the next decade underscores the urgency of strategic planning.

London’s stock market is predicted to face further contraction in 2024, driven by increased takeover activity and a dearth of new share listings, according to a report by brokerage Peel Hunt.

There is an expected acceleration of mergers and acquisitions, particularly among smaller companies, with 40 British firms valued at over £100 million receiving takeover offers in 2023.

In contrast, new share listings in the past two years have been minimal, barely reaching $1 billion in 2023, the lowest annual tally since the 2008 financial crisis. Foreign buyers, accounting for 55% of last year’s deals, have been notably active, taking advantage of depressed equity valuations, with UK M&A transactions carrying an average 50% price premium.

The dynamics of London’s stock market are caught in a challenging cycle, marked by low valuations, poor equity index performance, and limited liquidity, dampening interest from fund managers, retail buyers, and overseas investors.

The aftermath of the 2016 Brexit vote has seen an outflow of $100 billion from UK stock funds, as reported by Barclays Plc.

The departure of chip designer Arm Holdings Plc for its IPO in New York in 2023 was a significant setback for London, and high-profile listing failures, such as Aston Martin Lagonda Global Holdings Plc and Deliveroo Plc, have further hindered the city’s IPO scene.

The potential shift of travel group TUI AG’s primary listing from London to Frankfurt adds to the challenges facing the British stock market in the coming year.

Amidst discussions on the global tech landscape, Trachet stresses the importance of timing in selling a tech business.

Claire Trachet said, “Despite UK Prime Minister Rishi Sunak positioning the UK as a leader in AI safety regulation, while French President Macron emphasised the need for acceleration in France, government investment plans are critiqued for not going far enough.

“Collaboration, rather than competition, is advocated among European tech powers to challenge the dominance of US AI giants, requiring a collective approach and resource leveraging.

“As 2024 unfolds, embracing innovation, particularly in C-Suite hiring and fostering agility, responsiveness, and flexibility, becomes crucial for navigating opportunities and challenges in the dynamic tech landscape.”