UK small and mid-cap equity research shows signs of recovery in Extel survey

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UK small & mid-cap equity research recovery

Highlights

Extel survey shows UK small and mid-cap retail analysts drop to 17 from 29 since 2007, with sector coverage halved to nine sectors.
Broker consolidation accelerates as Numis Securities merges with Deutsche Bank in 2023, Panmure Gordon absorbs Liberum in 2024, and Stifel exits UK equities in 2025.
FCA relaxes MIFID II research payment rules post-2023, signaling early market recovery but highlighting persistent talent recruitment challenges.

Extel rankings highlight long-term contraction

As reported by CNBC, the latest pan-European Extel awards include the 2026 UK Small & Mid-Cap broker rankings, a segment that continues to reflect the damage caused by the January 2018 introduction of the EU's MIFID II rules.

The directive requires brokers to charge separately for analyst research instead of bundling it with trading commissions, a change that hits UK small and mid-cap equities especially hard. David Enticknap, CEO of Extel, says MIFID II deals equity research "not a fatal, but certainly a painful, blow."

That pressure is visible in analyst numbers cited in the survey. Small and mid-cap retail analysts fall to 17 from 29 in 2007, while support services analysts decline to 20 from 26. Sector coverage also narrows, with the UK SMID survey now spanning nine sectors, down from 18 in 2007, as areas such as Chemicals, Metals & Mining and Transport & Logistics disappear from the rankings.

Rule changes and market revival hopes

Broker consolidation continues to shrink the market's research capacity in recent years. Numis Securities is acquired by Deutsche Bank in 2023, Panmure Gordon merges with Liberum in 2024, and Stifel closes its UK equities business at the end of 2025.

At the same time, some aspects of the regime are now being rolled back. Following the 2023 Investment Research Review led by Rachel Kent of Hogan Lovells, the Financial Conduct Authority softens the rules and allows asset managers to bundle some payments for research and trade execution again.

Enticknap says the market is showing early signs of improvement, but argues that research must be valued by the buy side if liquidity is to return. He also says the industry needs younger entrants, a challenge for London's market as graduates increasingly pursue careers in technology rather than in the City.

Our previous coverage of the UK’s post-Brexit economic strategy debate explained how lingering uncertainty over trade arrangements and the movement of goods and services continues to weigh on business planning and policymaking. It also highlighted calls for the government to prioritise innovation and back high-growth sectors, while managing tensions between domestic goals and international commitments.

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