The volume of initial public offerings (IPOs) in London fell 75 per cent in the third quarter and the outlook for the rest of the year is even gloomier as the credit crunch continues to bite, according to research published today.

Ernst & Young, the accounting firm, said that there had been a substantial drop in companies listing on the London Stock Exchange and AIM, with only $4.5 billion (£2.2 billion) raised from 47 deals, compared with $18.5 billion in the second quarter from 62 deals.

However, emerging markets and the BRIC economies, Brazil, Russia, India and China, stormed ahead, racking up a record three months to September and raising $27 billion on 118 flotations, with China leading the pack.

While the UK market generally slows down over the summer, David Wilkinson, head of UK IPOs for Ernst & Young, said the crisis of confidence in the credit markets had hit investor appetite for new issues.

He said: “The lower number of companies listing in the UK has been caused by uncertainty in capital markets following the US sub-prime issue.”

Mr Wilkinson said that the UK picture was slightly distorted by two huge deals in the second quarter — the IPO of Russia’s VTB Bank, which raised nearly $8 billion, and the flotation of Russia’s Pik Group, which generated $2 billion.

However, with several IPOs already cancelled, Mr Wilkinson said the prognosis was bleak. He said: “The outlook for London in the fourth quarter of this year is looking gloomy, with a number of companies having already postponed their plans to float in recent weeks. If uncertainties continue around the credit crunch and access to capital remains difficult, we are unlikely to see a marked shift in deal activity in the UK until the first half of 2008.”

Although London’s outlook is dismal, Gil Forer, Ernst & Young’s global director of IPOs, said the story was almost the exact opposite in the emerging markets, where booming economies have fuelled a surge in domestic IPOs.

Activity in the BRIC nations helped to spark an overall 25 per cent rise in global IPO volumes in the third quarter, compared with a year ago, although total volume was down 22 per cent from the second quarter of 2007. China experienced a 79 per cent jump in public listings in the third quarter, with 75 IPOs, and seven of the top ten IPOs were in the emerging markets. Three of the top ten came from Brazil and five were from Central and South America.

China, Australia and the United States were the market share leaders with 75, 50 and 36 IPOs, respectively.By contrast, the UK notched up just 24 listings, France had nine and Germany eight. Poland had 22 IPOs.

Mr Forer said: “The global IPO markets still remain strong despite a drop in activity. The record numbers of IPOs in the emerging markets show that it is these countries that are driving global economic growth as international investors continue to look for high return opportunities. Thirteen of the top 20 IPOs were from emerging markets and interestingly only two of those chose not to list on domestic exchanges.”

Ernst & Young said the New York Stock Exchange, Hong Kong and Deutsche Börse were the top three exchanges, by capital raised. The NYSE accounted for 4 per cent of all IPOs, but the size of the issues meant it generated 15 per cent of the total $57 billion raised globally during the quarter.

In the UK, the float of Moneysupermarket.com, the financial comparison service, was the largest IPO in the quarter, raising £756 million, but Wagamama, the noodle bar chain, cancelled its IPO plans in favour of a sale.

Top 10 IPOs in London in the third quarter of 2007

1. Moneysupermarket.com Group, $756m (UK)

2. Alliance Bank, $704 million (Kazakhstan)

3. Vimetco, $523m (Netherlands)

4. China Real Estate Opportunities Ltd, $520m (China) (AIM)

5. Kazakhstan Kagazy plc, $273m (Kazakhstan)

6. Norcros (Holdings), $202m (UK) 7. Park Plaza Hotels, $172m (Netherlands) (AIM)

8. American Leisure Group, $153m (US) (AIM)

9. Queenco Leisure International, $150m (Greece) Main

10. Superglass Holdings,

IPOs pulled in Q3 include:

Rusal (world’s second-largest aluminum miner)

Smartstream Technologies (financial transaction software provider)

Wagamama (noodle restaurant chain)

IPOs pending include:

Eurasian Natural Resources Corporation (metals and mining company)

Gaucho Grill (steak restaurant chain)

Winkworth (estate agency)

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