City of London firms are preparing to make job cuts as the boom in initial public offers (IPOs) seen last year almost entirely dries up in 2022.
This comes as massive amounts of cash have been pulled out of the stock market by investors, with the FTSE All-Share index down 8% so far this year and the AIM index down over 27%.
Bankers have already taken the lead, with RBC Capital Markets and Berenberg, Gossler & Co laying off workers in London and elsewhere, while Credit Suisse Group AG (NYSE:CS) and Numis Corporation PLC (AIM:NUM) among several that reportedly are also cutting headcount.
New York search firm DMC Partners' David McCormack told CNBC that investment banks will be forced to rip out costs as their revenues in the second quarter fall.
The second quarter of 2022 registered the lowest number of IPOs on the UK's AIM junior market since 2009, with only one company raising £6mln.
BrewDog and Mishcon de Reya are among the companies that have confirmed they are holding off on going public.
Such low IPO activity was last seen in the first quarter of 2009, in the aftermath of the global financial crisis, when just one IPO raised £3mln.
Last year the second quarter saw 16 IPOs raise a total of £218mln.
"A sense of foreboding is again gripping financial markets, with anxiety rising that by attacking inflation, central banks risk severely weakening economies," said Susannah Streeter, markets analyst at Hargreaves Lansdown.
"The fragility of the UK economy has come under the spotlight with the final GDP data for first quarter, showing that although output grew 0.8%, real household disposable incomes fell by 0.2%, a bigger drop than previously estimated."
The current market conditions are said to be keeping 87% of fast-growing UK businesses from going public, according to research from Coupa Software.
In addition to rising interest rates, supply chain shortages, recent stock market volatility, and rising inflation, the top reasons cited for delaying an IPO are all related to current market conditions.
Deals have also been put on hold due to market uncertainty.
Walgreens Boots Alliance Inc (NASDAQ:WBA) has called off plans to sell its high street pharmacy business in the UK, blaming global financial conditions for the delay.
Uncertainty over how much central banks will tighten policy as they look to reverse rampant inflation is one of the reasons keeping companies away, as it has knocked stock market confidence and comes amid slowing consumer spending and recession worries.
UK businesses today called for urgent help from the government as they face a perfect storm of rising costs, supply chain issues and problems recruiting staff.