The CBI’s roadmap to restore confidence in the UK’s public markets and ensure they continue to support the economy
A vibrant, deep, and efficient market for publicly listed equities is a critical component of the UK's capital markets, and of the wider economy. Yet in recent years, they've faced a slow but steady decline. Fewer companies are choosing to list in London, investment has shifted abroad, and important parts of the capital ecosystem have moved away from domestic equities. If left unaddressed, there is a risk of UK public markets drifting into irrelevance, with fewer domestic champions and lower investor interest, leading to an inability to support homegrown high-growth companies.
The CBI's new report sets out a clear roadmap to restore confidence in the UK's public markets and ensure they continue to support growth, innovation, and opportunity across the economy.
A global set of challenges
The UK is not alone in facing these pressures, as markets around the world are being shaped by three major trends:
Public equity is no longer the default ownership model for large businesses seeking capital or liquidity
Private equity has emerged as a credible and attractive alternative, offering deep pools of capital, flexible ownership structures, and longer-term strategic horizons. Today, only 36% of the largest 500 companies in the UK are listed. The direction globally is towards deeper integration of public and private markets, with companies increasingly moving fluidly between ownership models as they grow, restructure, or seek liquidity.
Index funds have sored
Most equity investment now flows into index funds, which track markets rather than back individual companies. While this has lowered costs for investors, it has made it harder for active investors to play their traditional role in supporting company growth and good governance.
The US has come to dominate global equity markets
More than half of the world's listed equity value now sits in the US, for out of proportion to the size of its economy. This global imbalance has made it harder for other markets to keep pace. Other jurisdictions, such as the EU or Singapore, have started responding to these challenges.
UK-specific problems
That said, the UK faces four challenges which are unique, or at least more pronounced:
Capital has flowed out of the market
Over the past two decades, UK investors have steadily reduced their holdings in UK equities. In 1997, domestic pension and insurance funds owned nearly half of the UK market. Today that figure is just over 4%. This has weakened a vital source of domestic risk capital in the UK.
The number of listed companies has shrunk
Many of these exits have come through public-to-private transactions, where private equity firms acquire listed companies. Between 2016 and 2025, two-thirds of the firms that left the London Stock Exchange went private, often at significant valuation premiums.
While private equity has played a key role in bringing new companies to market, the net effect has been fewer listed businesses and more questions about public market valuations.
The market shows a strong bias towards dividends
UK investors tend to favour companies that payout income rather than reinvest for growth. FTSE100 firms paid out a much higher share of their earnings than their US peers between 2020 and 2024. While some of this comes down to regulation and investment culture, it may limit the ability of companies to fund innovation, productivity gains, and long-term expansion. Over time, this could hold back economic growth.
Scale-ups are not staying
The UK has a world-class start-up ecosystem and leads Europe in technology investment. But too often, fast-growing companies are sold or list abroad instead of maturing in the UK market. When these firms leaves, the UK loses not just a listing, but also the chance to build whole supply chains and industries around them. This trend, combined with a steady stream of public-to-private deals and companies shifting their primary listing overseas, has led to a sustained fall in the number of businesses listed on UK public markets.
What needs to happen next?
The report sets out four priorities to restore liquidity and competitiveness, and build public markets that work for the future:
- Develop a new narrative: The UK needs to tell a more confident story about its markets. London remains a globally attractive place to list. With fast-track index inclusion and strong global reach, the LSE offers real advantages. These should be promoted at home and abroad, alongside reforms to support greater retail participation and rationalise annual reporting requirements.
- Improve liquidity and competitiveness: Barriers like stamp duty on shares make it harder for investors to back UK companies. Pension rules and tax policies should better support equity investment. And the right incentives should be in place to boost participation from savers and the public.
- Strengthen the IPO pipeline: Listing in the UK must be simpler, more cost-effective, and more attractive. Tax treatment of IPOs, the availability of follow-on capital, and the relationship between private and public markets all need attention.
- Rebalance stewardship: As passive investing grows, the responsibilities of investors and proxy advisors must evolve. Good governance depends on engagement and shared accountability. Reforms should ensure that all investors, regardless of strategy, support the long-term success of UK companies.
If you have comments or feedback, please contact Tom Maitland.
