Next week’s Mansion House speech by Chancellor Rachel Reeves comes at a pivotal moment for the UK’s small- and mid-cap ecosystem.
Hopes are high that it will set out substantive measures to restore confidence in the public markets serving these companies, many of which are listed on the AIM and the lower tiers of the London Stock Exchange’s Main Market.
The timing is critical. After a prolonged drought in new equity issuance, green shoots are appearing across the small-cap landscape.
In June, more than 40 companies raised funds through a variety of mechanisms, from traditional placings and retail offers to convertible loan note deals.
July has continued at a similarly brisk pace. On one day last week, seven companies sought new capital.
The largest of the June round was The Smarter Web Company, which secured more than £70million from investors backing its Bitcoin treasury strategy.
And while crypto may have provided some impetus, the resurgence in fundraising has spanned sectors. Miners, technology groups and biotech firms have all tapped the market for much-needed cash infusions.
Chancellor Rachel Reeves’ Mansion House speech next week comes at a pivotal moment for the UK’s small- and mid-cap ecosystem
Many of these raises have been modest in scale, but they are notable nonetheless given the barren first four months of 2025.
That period exemplified a wider malaise; not just among the small-caps but across the UK stock market as a whole.
The war in Ukraine not only drove energy prices sharply higher, but also unnerved investors, while trade uncertainty and the conflict in the Middle East dampened sentiment.
No more acutely were these pangs felt than among those funds, family offices and private investors who traditionally back riskier, earlier-stage ventures through equity placings.
And that stage-fright meant that most sat on their hands rather reach for their wallets.
Cash is the lifeblood of the small-cap world. These companies are rarely self-sufficient.
Their survival often hinges on the ability to secure fresh capital to scale up, access new markets, or simply cover running costs as they pursue profitability. When the flow of funds dries up, business failures tend to follow quickly.
Alongside the funding drought, there has been a steady trickle of companies leaving AIM for private ownership, attracted by the absence of listing fees and the lighter regulatory burden. In 2024, 89 companies quit the market. Already in 2025, that figure is being approached.
While it is too early to call a reversal, there are encouraging signs.
Boutique investment bank Cavendish has reported increased activity in capital markets, attributing it to a weaker US dollar, rising political risk in the United States, and a growing investor awareness of the perils of being overexposed to American equities.
As global portfolios begin to rebalance, undervalued UK stocks are coming back into focus.
Peel Hunt, another firm deeply embedded in the small-cap space, struck a cautiously optimistic note last week.
‘We continue to have a strong pipeline of M&A transactions, with a number of situations both announced and in process, it said in a statement ahead of its annual meeting.
‘It remains to be seen whether a more general pick up in equity issuance and IPO activity will follow.’
Despite macroeconomic uncertainty, investor sentiment ‘appears to be increasingly resilient’, the broker added.
Yet the rise in mergers and acquisitions highlights a more fundamental threat to the UK’s small- and mid-cap universe.
The market is steadily losing its best growth companies to takeovers, while IPO activity remains subdued.
Without a concerted effort to encourage listings and growth at home, this trend could accelerate.
One obstacle is the steady outflow of UK capital from domestic equities. Charles Hall, Peel Hunt’s head of research, has called for direct measures to reverse this.
In a note published last week, he pointed to potential reforms of pensions, Individual Savings Accounts (ISAs) and stamp duty as ways to unlock more support for British firms.
He also proposed the creation of a UK-focused fund to back scaling private businesses and to bolster IPOs and listed companies. Hall suggested the British Business Bank is well placed to manage such an initiative.
All eyes will be on the Chancellor next week to see if the Mansion House speech delivers on this front.
A clear plan to channel more capital into small and mid-cap companies would not only bolster confidence, but also help stem the slow erosion of the UK’s growth stock base.
After months of stagnation, the current uptick in fundraising is a welcome development. But without structural support, the sector risks reverting to decline. The opportunity to change that narrative lies squarely with the Treasury.
For all the market’s breaking small- and mid-cap news, go to www.proactiveinvestors.co.uk
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .