Blockchain, FinTech and the IPO market - PwC's weekly media briefing

This week’s topics: 

  • The IPO market is starting to awaken - and a healthy pipeline of IPO candidates is building for 2021

  • The latest COVID alert levels and the implications for businesses 

  • The future of FinTech is bright, despite COVID-19

  • Blockchain technologies could boost the UK economy by £57 billion by 2030
     

Local COVID alert levels - what are the implications for businesses trading across the UK? 

Zelf Hussain, restructuring partner at PwC, said: 

  • Businesses, especially those in the hospitality and leisure sectors, will have to balance a number of spinning plates. They are faced with a complex task of working out how the regional and national restrictions impact multiple outlets and venues in locations which may be operating under different rules across England. Depending on potential further legislation, businesses also operating across Scotland, Wales and Northern Ireland will also need to assess where rules align or diverge cross-border. Operationally - workforce redeployment, downsizing and potentially mothballing some operations will be at the top of firms' agendas.

  • Discussions between businesses, landlords and other key stakeholders such as lenders have to start now if they haven't begun in earnest already. With Crown Preference changes moving HMRC higher up the insolvency creditor rankings from December 1, 'time to pay' tax agreements eventually falling due and the scheduled return of business rates from next March, we are likely to see a further increase in the use of restructuring tools such as CVAs. Companies will aim to insulate themselves either side of the festive season, set to be 'make or break' for a number of retailers, landlords, leisure operators, and their supply and delivery networks. Businesses need to act now to recover.”
     

The IPO market is starting to awaken - and a healthy pipeline of IPO candidates is building for 2021

Having ground to a halt earlier in the year, IPO activity is beginning to awaken. IPO markets across Europe raised €5.9bn from 33 IPOs in Q3 2020 compared to €4.2bn raised from 14 IPOs in Q2 2020. However, IPO volumes and values in the year to date still remain below those seen in 2019 as a result of the continued impact of COVID-19. 

Lucy Tarleton, Capital Markets Director at PwC, said:

  • Despite the continued impact of the COVID-19 pandemic, Brexit uncertainty and the usual summer hiatus, IPO activity showed signs of life in Q3, particularly with the mega IPO of The Hut Group in London, providing a welcome boost to UK IPO markets for 2020. THG’s choice of a listing on the Standard segment of the Main Market demonstrates that fast growing technology companies can achieve a multi billion valuation in Europe and founders can retain control of the business once public. The standard listing is not a common route to IPO used by UK companies of this size, but this IPO illustrates the choice of access to market that the London Stock Exchange can provide and gives companies flexibility to access a global pool of capital.

  • As we head into the final quarter of the year, we see a relatively healthy pipeline of companies, particularly in the technology sector, beginning to build. Despite the near term headwinds, deals are being done. Seven IPOs across Europe priced in the first week of October, several companies have announced their intentions to float before the end of the year, and a relatively healthy pipeline of IPO candidates is building for 2021.

  • It is also promising to see a number of international issuers in the IPO pipeline, continuing to recognise London as ‘open for business’ and a key global financial centre.
     

How is FinTech positioned as we look beyond COVID?

In a new paper, PwC predicts that the long-term outlook for the FinTech sector remains highly favourable for investors, despite the effects of COVID-19.

Over the first two months of lockdown, the majority of financial sponsors delayed new deals and focused instead on helping their existing portfolio companies. However, private equity investors have plenty of liquidity and have recently started returning to the market. We expect to see FinTech growth accelerate over the coming months and years and, with that, there will be a significant increase in investment into the market.

Andrew Macnab, FinTech Deals Leader, PwC UK, and report author, said:

  • The pandemic has highlighted an urgent need for financial services firms to innovate through partnership with FinTechs. Many financial services providers have seen COVID-19 put further pressure on margins and FinTechs can provide solutions to alleviate this pressure.

  • There has been a crystallisation of consumer and business behaviours around digital products, services and solutions, such as the accelerated shift towards a cashless economy, will be beneficial to FinTechs in the future.

  • Despite the immediate uncertainty surrounding COVID-19, FinTechs in many sub-sectors remain attractive targets for investors including: core financial services market infrastructure and software platforms, capital market / trading platforms, ecommerce payments, regulatory & governance software, and data management & analytics software.

  • The policy environment is becoming more supportive for FinTechs with HM Treasury’s announcement of a sector review in the UK recognising the role FinTechs have in supporting the sector’s recovery and future success.

  • While the near-term shock and ongoing market uncertainty have dealt a heavy blow to FinTech deals, the long-term outlook remains highly favourable for investors. In part, this is because the pandemic, for all its disruption, has created an urgent demand for the benefits FinTechs can provide and has dramatically accelerated trends that were already driving their growth.

  • Moreover, the policy environment is becoming more supportive for FinTechs, as seen with the Treasury’s recent announcement of a sector review in the UK, recognising the role they play in supporting the COVID-19 recovery and their importance to the future of the financial services sector.
     

Blockchain technologies could boost the UK economy by £57 billion by 2030

A new PwC report out this week forecasts that Blockchain technology has the potential to boost the UK’s gross domestic product (GDP) by £57bn over the next decade. PwC economists have assessed how the technology is currently being used and gauged its potential to create value across every industry, from healthcare, government and public services to manufacturing, finance, logistics and retail.

Steve Davies, global Blockchain leader at PwC, said:

  • Tracking and tracing products and services - or provenance - emerged as a new priority for many companies’ supply chains during the pandemic. Our report shows that it is the Blockchain application with the largest economic potential, and we forecast it to boost the UK economy by £30bn by 2030. Blockchain’s application here can be broad ranging from heavy industries, such as mining, through to fashion labels, helping respond to the rise in public and investor scrutiny around sustainable and ethical sourcing. 

  • The application of Blockchain in payments and financial services, including digital currencies, or supporting financial inclusion through cross border and remittance payments, is expected to boost the UK economy by £13bn by 2030.

  • Blockchain application in identity management including personal IDs, professional credentials and certificates to help curb fraud and identity theft is forecast to boost the UK economy by £8bn by 2030.

  • The application of Blockchain in contracts and dispute resolution is forecast to boost the UK economy by £3bn by 2030. 

  • Customer engagement, including Blockchain’s use in loyalty programmes, is forecast to boost the UK economy by £1.8bn by 2030, and it further extends its potential into a much wider range of public and private industry sectors.

  • Blockchain has long been associated with cryptocurrencies such as Bitcoin, but it has much more to offer, particularly in how public and private organisations secure, share and use data.

  • As organisations grapple with the impact of COVID-19, we have seen an acceleration in many disruptive trends. Our analysis shows the potential for Blockchain to support UK organisations in how they rebuild and reconfigure their operations, underpinned by improvements in trust, transparency and efficiency.

 

Something to read: 

Our recent Global Entertainment & Media Outlook points at the accelerated consumer behaviour, leading to an amplification of digital disruption. The report also touches upon some of the challenges around regulation and trust and talks about securing growth in the fast-forward world.

 

Contact us

Rebecca Lloyd

Manager, Corporate Affairs, PwC United Kingdom

Tel: +44 (0)7483 329628

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