Britain’s market for small and medium sized stocks is shrinking rapidly, challenging London’s status as a international financial center, according to UK investment bank Peel Hunt.

A lack of initial public offerings, along with a flurry of takeovers by overseas and private equity firms, mean there are more companies leaving the UK market than joining it. The trend is particularly pronounced for the FTSE Small Cap Index, which Peel Hunt says has lost 10% of its members and 20% of its market capitalization this year.

“We are currently in a doom loop, where valuations are low, liquidity is reducing, investors are seeing withdrawals and there is little desire to IPO,” Charles Hall, Peel Hunt’s head of research, wrote in a report. “If this continues, the UK could lose a crucial part of its financial ecosystem.”

While Peel Hunt’s analysis focuses on Britain’s smaller companies, the bluechip FTSE 100 has also been suffering. London lost its status as Europe’s biggest stock market last November, extending an equity slump that stretched back to Britain’s vote to leave the European Union in 2016. A recent rise in oil prices allowed the UK’s commodity-heavy gauge to regain the crown, but the market is still struggling amid a floundering economy and a trend of companies fleeing to New York for listings.

That includes would-be UK market champions that have chosen to list in the US, like chip designer Arm Holdings Plc, and firms that have shifted their primary listings to New York, like Irish building materials firm CRH Plc. Listings flops for several high profile London IPOs over recent years — including Aston Martin Lagonda Global Holdings Plc and Deliveroo Plc — haven’t helped.

A shrinking pool of stocks weighs on economic growth and investment, and becomes a vicious cycle for investor flows, Hall wrote. Peel Hunt’s analysis shows that 27 companies with a market capitalization of more than £100 million ($122 million) have received M&A offers so far this year, mostly from financial buyers or foreign suitors, and may therefore exit the market. Among them are FTSE 250 members Dechra Pharmaceuticals Plc and Network International Holdings Plc.

Hall said upcoming regulatory reforms for UK capital markets are welcome, but that attracting investment in smaller stocks also needs to be addressed by reforming taxation measures.