Flotations fall as investors cold-shoulder small firms

FLOTATIONS on the London Stock Exchange slumped to a 10-year low in the first quarter of 1999, hit by investors' aversion to small companies, a survey by the accountancy firm KPMG will reveal today.

According to the study, a "virtual boycott" of smaller firms by leading fund managers led to just 10 new listings on the stock market in the first three months of the year - the lowest level in a decade.

Stripping out the six investment trusts that floated during the period, the number of full-blown companies debuting on the London market is reduced to four: the beer giant South African Breweries and IT firms Synstar, Axon and Morse.

The survey claims that if the current trend continues, the number of new issues in 1999 will fall below the 69 achieved last year, one of the worst on record.

Small firms have had a difficult time as a flurry of merger activity and the introduction of the euro prompted investors to focus on large groups with international exposure. Their plight - many small firms are manufacturers and exporters - has been compounded by theperception that they suffer more than bigger groups from the strength of the pound and the slowdown in the UK economy.

Neil Austin, head of new issues at KPMG Corporate Finance, said: "Our survey is further confirmation that smaller companies are being cold-shouldered... The gloom surrounding the new issues market shows no sign of lifting."

The study says the climate for small companies remains very poor, and the rest of the year will be dominated by a few large floats, such as the recently completed pounds 2.2bn listing of the property group Canary Wharf.