There was a much-needed boost for the City today, with two companies announcing plans to float on the stock market and confirmation that the UK economy grew in July, easing the worst fears about a looming recession.
The pound found some relief as the mood improved, rising up past the $1.17 mark, adding 4 cents to its valuation in a week.
It came after a mainly bleak year in which the wider economy has slowed and deal-making has been drying up. But the twin announcement of stock listings – from Independent Living, for £150 million, and Sustainable Farmland Trust, for £200 million – will ease worries in the square mile about the slowdowns.
Wider economic data out today also looks less bleak. Official figures show that the UK economy grew 0.2% in July.
That was less than hoped, but it did ease the worst fears about the severity of a potential recession this year.
Martin Beck, chief economic advisor to the EY ITEM Club, said: “Last week’s announcement of an energy price guarantee should greatly reduce the risk of the economy experiencing a deep recession, but the next year or so will still be very challenging.”
The new flotations cheer the outlook for City dealmaking. The drying pipeline of business – with fees from floats, takeovers and other market activity nearly halving this year — sparked talk of big City job losses.
But the simultaneous arrival of announcements on two upcoming initial public offerings chimes with hopes that the new government will live up to its intention to ‘supercharge’ financial services, made by Liz Truss during her successful campaign to become Conservative leader and prime minister, in which she called the City “the jewel in the crown of the UK economy.”
Richard Hunter, head of markets at Interactive Investor, said: “While these two new floats are not big deals in themselves, they nonetheless indicate there is, at last, some light at the end of the tunnel for London dealmaking after a bleak year.”
Independent Living is a real estate investment trust focused on sheltered accommodation for the elderly. Its initial public offering has not yet priced, but it has said it is targeting a 5p per share dividend for its first two years as a public company. Atrato Partners is the float’s investment advisor, with RBC Capital Markets the underwriter.
Sustainable Farmland Trust invests in US agriculture, and is offering shares at 100p each, targeting a net initial yield of 4.5%. Its trans-Atlantic choice of the City helps London’s reputation in attracting international capital.