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London’s stock market has had a genuinely dreadful couple of years, and the numbers aren’t exaggerated for effect. By the third quarter of 2025, the London Stock Exchange had slipped to 23rd in Bloomberg’s global ranking of Initial Public Offering (IPO) destinations behind Oman, behind Mexico, behind Singapore, having raised just $248 million all year, the weakest haul in more than 35 years. AstraZeneca, one of the Financial Times Stock Exchange 100s (FTSE) largest constituents, announced it would be “upgrading” its New York listing. Wise had already gone. Flutter Entertainment and Ashtead Group had switched their primary listings to the US before that. It’s not a controversial claim to say that something is wrong with London as a place to list a company; the argument is over what, exactly.
Is stamp duty the reason for London’s slide?
CapX and the wider free-market press have a consistent answer: stamp duty. The logic, laid out repeatedly in their pages, runs that a transaction tax mechanically lowers share prices, because a buyer factors the tax into what they’re willing to pay, and lower share prices mean a higher cost of capital for anyone trying to raise money by floating shares. Abolish the 0.5% levy, the argument goes, and London becomes a more attractive place to list, full stop.
City AM ran with that claim this week.
It’s a clean story, and cleanness ought to make us a little suspicious.
The element of truth
Stamp duty is a real drag, and it isn’t just a right-wing talking point. Barclays, hardly a body with an ideological axe to grind, called for the government to review it, noting the levy costs the Treasury’s beneficiaries nothing to abolish in relative terms if you believe the dynamic-scoring case: the right-wing thinktank – Centre for Policy Studies has estimated abolition could add between 0.2 and 0.7 per cent to long-run GDP, and it currently raises around £3.8 billion a year, a meaningful but not enormous sum against a roughly £1.2 trillion annual budget.
Of course, it’s worth noting that the additional £3.8 billion added to GDP will represent a drop in tax take, meaning taxation must fall elsewhere. Peel Hunt has made a similar case specifically about liquidity, pointing out that a lot of UK share trading has quietly moved off-market and into swaps precisely to dodge the tax, which distorts the official liquidity figures analysts use to compare London against New York.
And crucially, this isn’t hypothetical anymore. In her November 2025 Budget, Rachel Reeves gave the City almost exactly what it had been asking for: a three-year stamp duty exemption for newly listed companies, covering share trading in the period right after flotation when liquidity matters most for a young stock’s credibility.
If stamp duty really were the dominant cause of London’s IPO drought, you’d expect this to have shown up clearly in the numbers. It hasn’t, decisively, either way. EY’s Q4 2025 data shows a “flurry” of late-year listings and some cautious optimism for 2026, but total 2025 IPO count still landed at just 23 companies, nine on the main market, fourteen on the Alternative Investment Market (AIM), against 18 the year before. That’s a marginal improvement on the very worst year in living memory, not evidence of a fixed problem.
Reasons to question the ‘neat’ Stamp Duty story
Every other explanation on offer for London’s decline is either equally plausible or, in places, considerably more direct than a 0.5% transaction tax.
Valuations, not costs
The gap CapX’s argument leans on that stamp duty inflates the cost of capital, is small next to the valuation gap between London and New York. Comparable companies routinely command a materially higher price-to-earnings multiple listing in New York than in London; commentary in the trade press has suggested you can raise roughly twice as much for giving up the same slice of a company by choosing New York over London. That’s a gap measured in tens of percentage points, not half a percentage point of transaction cost.
Where the money already lives
UK pension funds have spent two decades reducing their allocation to domestic equities, a trend running in parallel with, but largely independent of, stamp duty. A market with a shrinking pool of natural domestic buyers is going to have thinner demand for new listings almost regardless of the tax regime layered on top.
Private equity is doing the culling. A steady drumbeat of takeovers. KKR’s purchase of Spectris after a bidding war being one recent example. This trend has been removing companies from the London market faster than IPOs are replacing them. That’s a story about relative valuations and available capital for buyouts, not about the friction cost of trading shares.
The AIM comparison undercuts the theory a little
AIM-listed shares have been exempt from stamp duty since 2014. If the tax were the single dominant variable, AIM should be thriving relative to the main market. It hasn’t been immune to the same listings drought. Fourteen of 2025’s 23 total UK IPOs were on AIM, which sounds respectable until you compare it with AIM’s own much larger historical listing volumes.
Structural and regulatory drag
Index eligibility rules, the cost and slowness of the UK listing process relative to US shelf registrations, and litigation risk differentials between US and UK markets all get cited by City advisers as at least as significant as tax friction and not one of them will change if you scrap stamp duty tomorrow.
What’s actually going on
The honest version of this story is that London’s declining share of global IPOs is overdetermined and there isn’t one lever that, pulled, fixes it, which is precisely why the recently introduced stamp duty exemption hasn’t (yet) produced a visible turnaround.
Stamp duty on shares is a genuinely badly designed tax by most economists’ standards. It discourages liquidity at the margin, and abolishing it entirely rather than just for new listings would probably help a little, permanently, at a real cost to the Treasury. But treating it as the explanation for a 23rd-place finish behind Oman does more to flatter a pre-existing free-market prescription than it does to explain why AstraZeneca is heading for New York.
If Healey, the second of this administration’s chancellors now doing the job, is looking for one policy that single-handedly reverses London’s fortunes, stamp duty abolition isn’t it. It’s simply a small but reasonable item on a much longer list.
