Employee equity: the missing link in London’s capital markets recovery

The FT is running a series of articles examining how firms are having to adapt to the UK IPO dearth in order to survive. And it got me thinking and therefore writing.

London’s IPO drought is no longer a cyclical blip; it is becoming structural. Only seven IPOs so far this year, against 231 in the US, tells its own story. Fund managers have been forced to tilt towards private assets and international equities, while the domestic pool of investable stocks continues to shrink. That cycle - fewer IPOs, less investor choice, weaker liquidity - is self-reinforcing.

Most of the debate has focused on supply-side fixes: stamp duty, CGT tweaks, pension reforms. Important, but partial. What’s been missing is a serious look at the demand side. If the UK wants deeper, more resilient capital markets, it needs more investors. And the most obvious, yet overlooked, investor base is already sitting inside our companies: employees.

Why employee equity matters for the market, not just reward

Too often, employee share plans are dismissed as a reward / HR issue, a nice-to-have perk. That is the wrong lens. At scale, employee equity is capital markets policy:

• It broadens the retail investor base. Employees with real stakes through SAYE, SIP, CSOP or bespoke plans naturally become market participants at IPO, creating liquidity and dampening volatility.
• It anchors companies at home. A business with thousands of domestic shareholders is less likely to see New York or a trade sale as its only viable liquidity path.
• It contributes fresh capital. Satisfying equity awards with new shares, brings incremental equity into companies.
• It builds alignment. Firms with high levels of employee ownership display stronger governance, stability and resilience.

A lesson from Pisces

Pisces designed as a private market trading venue for illiquid growth assets, showed that London is capable of experimenting with new liquidity channels. While its focus is broader than employees, one of the by-products is to give staff shareholders a potential outlet for liquidity ahead of a full-fat IPO. That recognition matters: it demonstrates that capital markets reform and employee equity are not separate conversations. They intersect. A Pisces offering, tied explicitly to employee equity, could help embed retail investors into the ecosystem from the outset.

Three interventions that matter

If the government is serious about turning savers into investors, as Jupiter’s Matthew Beesley urges, then employee equity needs to be central to capital markets policy. That means:

1. Tax relief tied to London listings: enhanced CGT relief (14% BADR-style) for gains on employee equity where the company lists on the LSE.
2. Structured liquidity windows: a regulatory framework for pre-IPO secondary sales (Pisces), allowing employees to realise some value without forcing companies into a US listing.
3. Stamp duty exemption for employee share acquisitions (and ideally, for all share purchases) would significantly reduce frictional costs and support broader employee ownership. This would make it easier for companies to scale participation in equity schemes. Notably, share transfers on Pisces are set to be exempt from stamp duty, a clear acknowledgment of the dampening effect stamp duty has on transactions.

These are not marginal tweaks. They would change behaviour, for companies, employees and investors.

Restarting the flywheel

The logic is straightforward:

• More employee shareholders → broader domestic investor base.
• Broader base → deeper liquidity and stronger aftermarket support.
• Stronger liquidity → a healthier IPO pipeline.
• A healthier pipeline → renewed confidence in London.

That is the flywheel we need to restart.

Joining the dots

The government has shown boldness in pension reforms and private market access. But unless we connect those macro reforms to the micro reality of employee equity, the IPO drought will persist. London does not just need more companies to float, it needs more people to invest in those companies when they do. 

At Burges Salmon, we see daily how employee equity aligns interests, creates liquidity and supports growth. The challenge now is to scale that logic from the level of the individual company to the level of the market.