Numis, the London-based corporate broker, warned that investor fears over inflation and the war in Ukraine have sent activity levels in British equity capital markets to a near 10-year low.
Most companies seeking to raise money through a London listing have paused plans this quarter, while dealmaking activity has also been suppressed by doubts about the future of the UK economy amid spiralling inflation and energy costs.
In a trading update on Friday, Numis said revenues for the six months to March would be more than a third lower than a year ago at £74mn after trading was hit by the drop in activity in its investment banking division.
The company said trading profits had also been hit by “extreme market volatility” in the past eight weeks.
“Investment banking revenues for the half have been impacted by a deterioration in market conditions for equity issuance and, in particular, over the past three months concerns related to the acceleration and persistence of inflation,” it said.
“This has been overlaid with the recent geopolitical, economic and capital markets impacts of the war in Ukraine and together have suppressed UK equity capital markets in our second quarter to activity levels approaching a 10-year low.”
Numis said mergers and acquisitions activity continued to be positive, with a number of announced but yet-to-complete transactions, and a strong pipeline of future business. It said the outlook for capital markets was less certain, but pointed to markets that had regained some stability and expectations that activity would recover “to some extent during the second half”.
The company added that it did not “anticipate IPOs to feature prominently in the near term” but that corporate clients were still seeking to finance growth strategies.
The fall in flotations in 2022 will come as a disappointment too for UK government officials, who had hoped that changes to listings rules last year would unlock a wave of companies coming to the London market.
Numis said it would develop its European business from a new Dublin office announced after Brexit, which is expected to start trading during the second half of the year.
Rival Peel Hunt gave a more positive trading update on Friday, however, saying it had a stronger end to its financial year after a warning on profits five weeks ago.
A good period for its execution and trading business meant trading performance had been ahead of revised analyst expectations, it said, with revenue for the full year expected to be about £131mn.
Investment banking had also delivered record revenues, Peel Hunt added, despite the slowdown in activity across global capital markets in the last quarter of 2021 “as a result of rising inflation and interest rates, and the devastating war in Ukraine”.