Britain's small and medium-sized companies are trapped in a 'doom loop' that risks destroying a crucial part of the UK's financial ecosystem, analysts have warned.
Britain’s small and medium-sized companies are trapped in a “doom loop” that risks destroying a crucial part of the UK’s financial ecosystem, analysts have warned.
The pace of decline for listed companies outside the FTSE 100 and FTSE 250 is “relentless”, according to a report published by Peel Hunt.
The investment bank highlighted a 10pc decline in the number of companies on the FTSE’s SmallCap index. This number has declined by 30pc over the last five years.
It said markets are being hit by a swirl of negative factors including low valuations, falling liquidity, investors withdrawing their funds and a lack of initial public offerings (IPOs).
Charles Hall, head of research at Peel Hunt, said: “The pace of decline is relentless and is likely to continue unless effective action is taken quickly.
“We are currently in a doom loop, where valuations are low, liquidity is reducing, investors are seeing withdrawals and there is little desire to IPO.”
He called on the Government to bring in reforms to make it more attractive for smaller companies to list in the UK and more lucrative for investors to hold shares in those companies.
He added: “It is still significantly more onerous to be listed in terms of costs, bureaucracy, regulations and distraction for management, in stark contrast to private markets, where leverage is typically materially higher, pricing is opaque and there are tax advantages.”
This article was written by Chris Price and Adam Mawardi from The Telegraph and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.