Flotations and mergers hit by budget fears

British companies are delaying flotations and merger deals because of the uncertainty and downturn in investor confidence since the budget last month, according to a cautious outlook statement from Peel Hunt.
The broker to scores of small and medium-sized companies reported a return to profits in the six months to September but said that some client deals had been paused in the past few weeks and months.
“Although we have a solid pipeline of corporate transactions, including M&A and IPOs, we expect a degree of uncertainty to persist in the short term and consequently some of these transactions are more likely to execute in our next financial year [after 1 April 2025],” it said.
Steven Fine, chief executive, said the watering down of inheritance tax breaks for investors in Aim stocks in the budget last month was a disaster for the City, even though some people were relieved the tax advantages were partly retained.
“It’s going to mean continued relentless outflows from Aim for inheritance tax funds,” he warned.
Fine, a cheerleader for the City of London, also issued a passionate wake-up call, saying more needed to be done to stem the outflow of investor money from the UK and the delisting of UK stocks.
He said that UK pension funds should be forced to invest minimum amounts in UK stocks, suggesting a mandatory minimum of 10 or 15 per cent, which is far higher than the average allocation today of about 3 per cent.
He accused pension funds of “hypocrisy” in complaining about the recent reforms to the UK listing and perspectives rules when they had so little invested in the UK in the first place.
The net redemptions from UK investment funds for 41 straight months and the constant delisting of UK stocks was a grave threat to the City. “It’s weird, people don’t seem to care. It really does bother me,” he said, enumerating another five actual or possible delisting events of the past few days: Direct Line, Loungers, TI Fluid, JustEatTakeaway and Renewi.
Fine rejected the suggestion that the City’s troubles were partly self-inflicted after UK banks and brokers had promoted the flotations of so many badly performing companies in London. “There’s more garbage in the US than there is here,” he said.
The company lifted revenues by 26 per cent to £53.8 million in the half year, returning from a loss last time of £800,000 to a pre-tax profit of £1.2 million. Stripping out share-based bonus provisions, the company went from a loss of £500,000 last time to £4.6 million of adjusted profit.
Before the recent lull in activity, Peel Hunt reported a strong first four months in the period, which included the successful flotation of Raspberry Pi, the mini-computer manufacturer.
As well as advising corporate clients on deals and floats, Peel Hunt operates an equities research division and an execution-only trade trading business, All three divisions lifted revenues.
Analysts at Keefe, Bruyette & Woods, the American investment bank, said the results were ahead of expectations but the slowdown in deal activity was “disappointing”. Peel Hunt shares were flat at 108½p.
The Aim-listed company acts for four FTSE 100 companies and 42 FTSE 250 constituents.