The latest Extel survey highlights the ongoing challenges faced by equity analysts covering the U.K. small and mid-cap (SMID) sector, a segment that has experienced significant attrition since the introduction of the EU’s MIFID II regulations in January 2018. MIFID II, which required brokers to charge separately for analyst research rather than bundling it with broking commissions, had a particularly severe impact on the small and mid-cap segment of the U.K. equity market. David Enticknap, CEO of Extel, described the effect as 'not a fatal, but certainly a painful, blow' to equity research [1].
Concrete data from the Extel survey underscores this decline: the number of small and mid-cap retail analysts has dropped from 29 in 2007 to just 17 in 2026, while support services analysts have fallen from 26 to 20 over the same period. The sector has also seen significant consolidation, with notable events including Numis Securities being acquired by Deutsche Bank in 2023, Panmure Gordon merging with Liberum in 2024, and Stifel closing its U.K. equities business at the end of 2025. The breadth of sector coverage has narrowed as well, with the number of individual sectors in the U.K. SMID survey shrinking from 18 in 2007 to just nine in the latest rankings. Sectors such as Chemicals, Metals & Mining, and Transport & Logistics are no longer represented [1].
However, there are signs of potential recovery. Following the 2023 Investment Research Review led by Rachel Kent, the Financial Conduct Authority has eased some rules, now allowing asset managers to bundle certain payments for research and trade execution. Extel’s Enticknap noted, 'The seeds are there. But research has to be valued. The buy side has to value it. If there’s research, liquidity will follow. And we need to see young blood in the business.' This regulatory shift could help revive analyst coverage and market liquidity in the small and mid-cap space if the buy side recognizes the value of research [1].
No immediate market reaction or analyst forecasts are detailed in the article, but the regulatory changes and industry consolidation are positioned as key factors influencing the future of U.K. small and mid-cap equity research [1].
CONCLUSION
The U.K. small and mid-cap equity analyst sector has contracted sharply since MIFID II, with fewer analysts and reduced sector coverage. Recent regulatory easing offers hope for a revival, but the sector’s recovery depends on renewed buy-side demand for research and the entry of new talent.