It’s a great quiz question: what do Oman, Poland and Indonesia all have in common? According to Bloomberg, they have had higher-value Initial Public Offerings (IPOs) than the UK in 2025.

An IPO, the first time a company raises money publicly, is the lifeblood of stock exchanges — replenishing them as older companies inevitably decline. This year, the UK ranks 23rd globally for IPOs, with just $248 million raised, which puts it below Mexico — and only $20 million more than Greece, in 24th place.

This is not a surprise: Britain’s stock exchange has for some time been a slow-motion car crash. In the years before the financial crisis, the UK IPO market was worth $60-70 billion a year. By 2015, this had dropped to around $25 billion a year. In 2019, the annual figure had fallen to $3.7 billion.

Some people will blame this on excessive focus on “ESG” issues and too much red tape. But the steady erosion of IPOs over nearly two decades indicates something much deeper than that. More broadly, the UK stock market reflects the fundamental weaknesses in the national economy, such as the lack of domestic investment and over-dependence on a limited range of service exports.

Companies list on the stock exchange in part to create a payout for core investors and founders. Another reason is to access capital, to grow and expand the business beyond the limits of initial investments. Either way, they are looking to access deep pools of cash. The less money there is invested in the stock exchange, the weaker the valuations will be and the more expensive accessing that cash is. So why is there less cash in the British stock market?

In 1989, 51% of all UK shares were held by individuals and pension funds on behalf of individuals, totalling a worth of £259 billion. In 2022, the latest year covered by ONS data, this had fallen to just 12% — worth £298 billion. This is an annual rate of growth of just 0.42%, around a fifth of the annual rate of growth for the UK economy as a whole. We have chosen to invest less in our businesses and spend more on ourselves.

This has been driven by two things. The first is changes in pensions. Requiring defined benefit funds to declare their financial liabilities made them focus on short-term returns to avoid reporting deficits and therefore risking a bailout. There has also been a shift from defined benefit pensions to defined contribution pensions, with the latter concentrating on maximising financial returns rather than targeting a particular level of benefit. This has led to British money flowing abroad, with 70% of private-sector defined contribution schemes invested in overseas shares so as to chase faster returns for their beneficiaries. That might be good for pensioners, but it’s hardly ideal for UK plc.

British chancellors keep saying they will fix this, but until they accept the necessity of trading lower returns on pensions to support higher domestic investment, nothing will change. As the entirely voluntary Mansion House Accord signed this year by Rachel Reeves makes clear, everything is ultimately subject to the fiduciary duty of pension fund trustees. This duty is typically understood as maximising the financial benefit to those holding their pensions.

The second problem is Britain’s over-dependence on a narrow spectrum of business, particularly financial and professional services. Between 2007 and 2023, the global trade in services increased by 5% per year, compared to growth of over 9% a year in the 16 years before the financial crisis. The UK is still a world leader in services, but its rivals are catching up. The country’s market share of global service exports has fallen from 9% in 2005 to 7.3% in 2024. This is bad news for the UK’s stock market, which remains heavily weighted towards financial services, with just 4% of FTSE shares being in technology sectors and 28% in financial services.

Britain’s declining IPO performance is just another red flashing light on a car dashboard that is already on fire. It has long been time to consign the aged vehicle that is the globalised and financialised UK plc to the scrapyard, but our economic and political leadership simply won’t let go of the old banger.

---

Andrew O’Brien is the former Director of Policy at the think tank Demos and currently Head of Secretariat of the Independent Commission on Neighbourhoods. He writes in a personal capacity.

ADOBrien88

---