Capital raising from UK-listed corporates fell very significantly in the first half of 2022 as concerns over growth and inflation were compounded by war in Ukraine and economic uncertainty, with the travel and leisure sector seeing one of the largest drops when compared to the first half of 2021, as businesses in the sector raised a total of £531m in 2022, down from £2.5bn in in the second half of last year and £2.2bn in the first half of 2021.
This shows that, despite output growth continuing to rise following the dwindling impact of the pandemic, the sector has already started to see the effects of inflation and rising costs, as purchasing power and consumer demand begins to wane.
Analysis of London Stock Exchange data on capital raising from investment bank Goodbody shows that in H1 2022, just £5.7bn in new capital was raised by UK listed companies, the slowest start to a year in nearly a decade. When excluding listed investment vehicles, this figure falls to £2.5bn.
The analysis demonstrates a marked shift from the last two years, where corporates adversely impacted by the pandemic turned to investors to shore up their balance sheets. Capital raising in the first six months of 2022 is less than 50% of that in the first half of 2021, and around a third of the amount raised in the first half of 2020.
Piers Coombs, Head of Goodbody’s London office, said: “Following the record pace of fundraising during the pandemic, there is a very different tone to Equity Capital Market activity so far this year. With such a sharp move in valuations across almost all sectors – the FTSE250 is down 19% so far this year - there is little momentum behind PLCs’ desire to raise new capital. For now, it’s all about honing strategy, starting buyback programmes if appropriate, and focusing on what management can control.”
Weakening market confidence has meant the number of large transactions has declined very significantly in comparison to figures from 2021. In the first half of the year, no companies raised more than £1 billion in a single transaction, while Ocado Group was the only corporate to raise more than £500 million, as it looks to expand its technology arm in the second half of this year.
“Those that are raising capital are mostly doing so on a needs must basis, and the prevailing macro uncertainty is not helping in providing supportive aftermarkets. That in turn is further impacting market confidence”, comments Coombs.
The most active sectors for capital market activity continue to be consumer industries impacted by the pandemic and currently facing reduced consumer confidence. Consumer Discretionary businesses raised the most capital (£692m), followed by and Consumer Staples (£588m) and Industrials (£373m).
*Excluding closed end and open-end investment vehicles
Coombs concludes “Looking ahead, while it is impossible to say with certainty when activity will begin to pick up, our view is that this will happen once there is more clarity on the interest rate cycle in Europe and the US and, importantly, some visibility on inflationary pressures subsiding. The latter could reasonably come through in late Q3/Q4 this year, not least as we start to lap into higher comparatives from this time last year. IPO pipelines have moved to the right, with the majority of active processes now targeting 2023 rather than the second half of this year.”