Broker warns tax rises could derail London IPO revival

A senior City broker has warned Chancellor Rachel Reeves that planned tax rises in the forthcoming Budget could scupper hopes of a revival in initial public offerings (IPOs) on the London market this autumn.

A bumper summer for the FTSE 100 — its strongest gains since 2016 — has raised expectations of a fresh wave of listings, a prospect that would boost banks, lawyers and advisers in the Square Mile after a prolonged drought of public flotations. Julian Morse, co‑chief executive of City broker Cavendish, said the market upswing could be short‑lived if the Budget includes significant tax hikes.

"That's the big unknown. If taxes rise substantially it will slow or stop growth," Morse told The Mail on Sunday. "Any economy in a high‑tax environment doesn't do well. The IPO market is dependent on the economy. So if growth stalls and we go into recession that would be pretty negative."

Morse said he still expected an upturn in flotations over the coming months, reflecting rising investor appetite after the FTSE's summer performance. But he warned that a heavy tax burden on businesses could deter company owners and founders from pursuing public listings, or prompt them to defer plans until conditions were clearer.

The warning highlights the sensitivity of capital markets to fiscal policy at a moment when market participants are watching closely for signs of a sustained recovery in UK equity markets. A revival in IPO activity would help replenish fees for advisers and underwriters that have been thin in recent years amid a near absence of major UK listings.

Market strategists and corporate advisers say flows of new listings typically follow broader economic momentum; strong equity returns can encourage companies to seek public markets for growth capital and shareholder liquidity. Conversely, higher taxes and cooler growth prospects can damp investor sentiment and reduce the pool of viable candidates for public offerings.

The Chancellor's Budget, scheduled for later this year, will be scrutinised by business groups and City firms for measures that could influence investment decisions. For now, optimism about an autumn pick‑up in listings is tempered by the prospect of fiscal changes that, according to Cavendish's co‑chief, could reverse recent gains and stall a nascent IPO revival.