Brokers take a battering as downturn hits activity

Three City brokers have warned that weak activity in the markets has hit their business.

As the industry struggles with the economic downturn, Numis said its revenues for the six months to the end of March were likely to have been down 14 per cent year-on-year at around £64m as a result of ‘weaker’ investment banking markets.

The company predicted there would not be ‘any meaningful pick-up’ in new listing activity over the next six months as concerns over high interest rates and inflation continued to dampen the mood across global stock markets.

Numis also said that investor sentiment towards the UK remained ‘relatively weak’, adding that institutions focused on Britain’s domestic market had experienced ‘persistent’ outflows of funds during the last six months. The shares dipped 2.4 per cent, or 5.25p, to 210p.

Rival Peel Hunt, which also focuses on small and medium-sized companies, saw shares slump 2.8 per cent, or 3p, to 103p after it issued a profit warning.

Revenues for the year to March 31 fell to £82m from £131m in 2022 as the ‘uncertain global economic environment’ hit its investment banking business.

The company also warned activity on capital markets remained ‘at historic lows’ while it continued to face cost pressures from inflation. 

As a result, it warned it was likely to have been ‘marginally loss making’ for the year, worse than market expectations that it would break even.

While its investment banking arm has seen a ‘gradual improvement’ over the last few weeks, Peel Hunt cautioned risk remained high due to ‘negative’ economic news including the recent bailouts of US banks and troubled European lender Credit Suisse.

WH Ireland, meanwhile, said market conditions continued to impact its business and as a result it was trading below expectations. It made a loss of over £2.2m for the year to March. Shares fell 2.6 per cent, or 0.5p, to 18.5p.

City brokers and investment managers have been knocked over the past year as the economic downturn slammed the brakes on deal-making, fundraising and stock market floats.