Building on our 2023 report on the UK public equity market, UK Finance’s latest thought leadership report, in association with EY, explores the evolving relationship between UK public and private markets and shares a series of suggested actions on how UK capital markets can be better harnessed to support UK businesses and the Government’s growth agenda.  

What did we find? 

The UK has a strong capital base 

Outstanding UK capital now sits at £6.9tn, with an average of £584.0bn deployed each year (between 2020 and 2024). 

Private capital markets have grown significantly, but public markets continue to play a key role  

Private markets provided 73 per cent of UK equity capital between 2020 to 2024, reflecting an increasing trend of companies securing funding through the whole stage of their development cycle. 

Although the overall market capitalisation of UK traded equities has declined since 2013, public markets continue to be a vital source of long-term funding to UK companies, providing over 80 per cent of outstanding public and private capital.  The market capitalisation of UK public equity remains five times larger than outstanding private equity. 

The relationship between private and public markets is evolving, with innovation driving convergence 

Markets are evolving to meet the needs of their users. Private market operators are increasingly utilising public market like infrastructure to raise capital more efficiently and diversify their investor base. The development of platforms to match private companies with investors has gained momentum, with the UK in the process of establishing PISCES, a platform which will enable investors to invest in private companies with the confidence of regulated disclosure requirements, but at a level more accessible to a smaller company.  

There are opportunities for more companies to obtain the capital they need to grow 

Despite this, there are opportunities for more businesses, particularly those in the early growth stages and in certain sectors and regions of the UK, to secure the funding they need to grow. We estimate c. 17,000.

A key focus of the report is identifying ways to ensure that all businesses, regardless of sector or region, can access the capital they need to grow. Addressing these challenges will require collaboration across government, regulators, and industry to create a more inclusive funding landscape. 

What do we propose? 

Remove structural challenges to facilitate capital growth and access to capital by, for example, working collaboratively with the financial services sector to finalise the Industrial Strategy and accompanying Financial Services Growth and Competitiveness Strategy, ensuring that these initiatives dovetail with other relevant Government initiatives. 

Address frictions to promote the deployment of capital and efficient utilisation of UK markets, by, for example, removing the 0.5 per cent stamp duty charge on UK equity. 

Capitalise on the UK’s strength in product and market innovation to enable economic growth, by, for example, taking action to extend the EIS and SEIS schemes beyond 2035 and by increasing the capital limits and the age of companies eligible under both schemes. 

Ensure greater transparency on investment opportunities, availability of funding and support for businesses, removing fragmentation and reinvigorating the growth escalator, by, for example, establishing a prototype for a hub network across the regions and devolved nations offering education and resources to start-up CEOs. 

A unified way forward 

The overwhelming sense amongst market participants is that a unified course of action, looking across public and private capital markets, needs to be taken now. As the Government progresses an ambitious agenda for economic growth, we have a generational opportunity to make the UK’s funding environment world-leading. For this to be successful, a bold and holistic approach to tackle the remaining structural challenges facing UK capital markets needs to be taken by Government, conceived and delivered in partnership with industry. 

Please contact us if you wish to discuss our report in more detail.