Why UK equity research analysts matter more than ever

At a time when the UK is focused on revitalising its capital markets and attracting new IPOs, one part of the ecosystem remains underappreciated: equity research. Yet without credible, independent analysis, the UK’s ambitions for greater growth, liquidity and global relevance will be harder to realise.

The judgment and credibility of individual analysts continue to shape investor behaviour and corporate outcomes. High-quality research does more than inform: it builds conviction, supports capital allocation, and ultimately underpins market efficiency.

Our recent work with Extel, culminating in the publication of the 2026 UK Small & Mid-Cap Brokers (SMID) Rankings, offers a timely lens on the state of the market. Based on anonymised feedback from portfolio managers and analysts, the survey ranks equity analysts and firms on the quality of their research. The results highlight a clear trend: research capability is becoming increasingly concentrated among a smaller number of firms. 

As Ian King noted in his CNBC report on the results, the past two decades have seen a marked reduction in analyst coverage. In 2007, there were 29 small and mid-cap retail analysts; today there are just 17. Over the same period, the number of sectors covered in the UK SMID survey has halved from 18 to 9, with areas such as Chemicals, Metals & Mining, and Transport & Logistics falling away as more companies have delisted than joined the market.

This shift reflects a broader change in market practice. When I began in financial communications 25 years ago (you wouldn’t think it from looking at me!), organising results-day analyst meetings were a cornerstone of the job. Even smaller companies could expect strong attendance, and expanding analyst coverage was an explicit objective of any account. Analyst visits to factories or production sites to meet management were often held, typically alongside a dinner and drinks. Today, many listed companies don’t host meetings at all, reflecting the reduced analyst pool.

Why does this matter? Because equity research is not a ‘nice to have’. For investors, it enables informed decision-making and efficient capital allocation. For listed companies, particularly small and mid-cap growth businesses, it drives visibility, liquidity, and valuation. And for prospective issuers, the depth and quality of analyst coverage remain a critical factor in deciding where to list.

The challenge, widely recognised across the market, is that the economics of research have been under sustained pressure since the introduction of MiFID II, the EU’s Markets in Financial Instruments Directive, implemented in 2018, which required asset managers to unbundle payments for research from trading commissions. While designed to increase transparency and reduce conflicts of interest, this reform significantly reduced the financial incentives for banks to produce research, particularly on smaller and less liquid companies. Coverage has declined most sharply in precisely those areas where it is most needed. The result is a self-reinforcing cycle: reduced coverage leads to weaker liquidity and valuations, which in turn diminishes the UK’s attractiveness as a listing venue.

Encouragingly, policymakers and market participants are increasingly aligned on the need for reform. The Quoted Companies Alliance, among others, has called for improved access to research and a framework that better supports growth companies. The goal is not to dilute standards, but to ensure that regulation supports, rather than constrains, capital formation.

For London to compete effectively with New York and other global centres, it needs a fully functioning ecosystem: supportive regulation, engaged investors, ambitious companies, with high-quality research connecting them. Equity analysts play a vital role in that system, translating complex business models into investment insight and holding companies to account over the long term.

If the UK wants to attract more IPOs, it must invest in the conditions that make public markets work. Strong equity research is not peripheral, it is foundational.