More can to be done to help those in tech sector access capital for growth

Over the past year, the UK tech sector has been the focus of several Government initiatives and reviews, aimed at strengthening the ecosystem so that companies can innovate, scale up, and create jobs.

Neil Shah, Senior Business Development Manager, Technology, London Stock Exchange

New research by Tech Nation has found that tech companies are increasingly vital to the growth of the UK economy, with the Gross Value Added (GVA) contribution growing on average by 7 per cent per year since 2016.

The report also found that the UK tech start-up and scaleup ecosystem is valued at $585bn, an increase of 120 per cent from 2017. However, while there is a strong foundation, more can be done to support the tech sector to access the capital it needs to scale from start-ups to global businesses.

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In November 2020, the UK Listing Review was commissioned as part of plans to further strengthen the UK’s position as a world-leading financial centre and attractive location for companies across the UK and globally to list here.

Recommendations included making free float requirements more flexible and allowing dual class share structures on London Stock Exchange’s Premium Segment with appropriate safeguards.

Amendments to UK listing rules were also recommended in the Kalifa Review of the UK FinTech sector, alongside improvements to visas to attract global tech talent, and the creation of a Centre for Finance, Innovation, and Technology to boost growth and improve coordination across the sector.

London Stock Exchange welcomes the findings of both reports, which will bring more choice for innovative companies looking to list and scale up in the UK.

They also highlight the need to expand the capital market toolbox available to high growth companies to improve the route from private to public capital markets in the UK. Continuing to evolve the UK’s financing ecosystem is key to ensuring that our public markets remain attractive for both innovative businesses as well as investors.

London Stock Exchange has supported dual class shares and introductions (also known as ‘direct listings’) for more than 25 years through its Standard Segment. Extending dual class share structures to the Premium Segment with appropriate investor safeguards, such as sunset clauses, could allow firms to be eligible for inclusion in benchmarks such as the FTSE 100 while maintaining the high standards of corporate governance associated with the UK’s capital markets.

The momentum behind tech and consumer internet IPOs in the UK continues to build. 44 tech and consumer internet company IPOs have raised £7.6 billion over the past five years and there are now more than 190 companies from the sector with a primary listing on London Stock Exchange.

These firms have a market valuation of £156bn and the FTSE All Share Technology Index continues to outperform relative to the FTSE All-Share Index.

In 2021, we’ve already seen listings of UK companies such as Moonpig, ATG, Virgin Wines, AMTE Power and In the Style, and US games developer and publisher, tinyBuild. Several other firms including Trustpilot and Deliveroo have also signalled their intent to pursue an IPO.

Both institutional and retail investors are demonstrating their appetite for growth, reflected in their support of capital raising by tech and consumer internet companies.

Not only have these offerings been oversubscribed, prominent buyside investors, such as Blackrock, have provided significant cornerstone commitments ahead of these IPOs.

Access to efficient, long-term, and repeat rounds of capital raisings is vital for innovative companies to finance their growth strategies.

We need to ensure that our capital markets continue to serve the purpose of enabling institutional and retail investors to access these companies and that the public markets continue to be an effective venue for exciting growing companies to raise capital.