The UK's main Initial Public Offering market has yet to take off although the pipeline of flotation candidates is looking stronger than at the beginning of the year, according to research by accountant KPMG's Corporate Finance practice.
For 2005 to date, seven trading companies have joined the Official List to raise combined funds of £569 million.
Activity levels trail behind last year as this compares with eight trading company IPOs raising a total of £1,368 million in the first half of 2004 - a 58 per cent drop in the value of activity. Last year's fund-raising levels were bolstered by the Eircom (£544 million) and Redditchbased Halfords (£307 million) listings.
Charles Cattaneo, partner at KPMG Corporate Finance in Birmingham, said: " Investor appetite remains strong but only for those with a compelling growth story.
"As ever, prospective IPO candidates have to be of the right quality and marketed at the right price. There are plenty of companies in the queue with several looking imminent. Five of the seven main market IPOs of this year were in May and June so we should expect to see a significant upturn in activity during the second half."
The seven trading companies to join the Main Market so far this year were: Carter & Carter (£54 million); Ardana ( £ 21 million); IG Group ( £ 220 million) ; Foseco (£107 million); Micro Focus ( £ 66 million) ; Agcert (£61 million) and Prostrakan (£40 million).
Additionally, 20 VCTs/ investment trusts joined to raise a combined £ 803 million, plus three introductions raising no money.
Meanwhile, the Alternative Investment Market which reported a record March, has seen 148 new entrants to the end of May this year raising a total of £1,252 million - outstripping the value of money raised by trading companies on the Main Market over the period.
The great majority of the companies joining AIM are small - less than 15 per cent of new entrants since the beginning of 2004 raised over £20 million each and the great majority raised an average of only £3 million.
Some 20 per cent of entrants in the last 17 months to the end of May have been overseas companies raising a total of £750 million. Of these, some 44 per cent were natural resource companies.
Mr Cattaneo said: "It (AIM) is fully established with a record number of new entrants and is providing a platform for growth for small and mid-sized companies.
"Going forward the challenge for AIM will be to establish itself as the market of choice for European companies. It has enjoyed success in wooing overseas players but these have been concentrated in certain geographies and sectors, such as natural resources."
Companies in line for a full listing include Experian (£4 billion); BP spin-off, Innovene (£2-3.5 billion); food producer, RHM (£1.5-2 billion); power station, Drax (£1.5 billion); Gala (£1 billion) and defence research company, Qinetiq (£1 billion).
There are a further ten UK companies, each likely to be capitalised at over £500 million, who may join the main London market this year. Online gaming operator, PartyGaming, is in the middle of its floatation and there is a host of other gaming companies looking to debut this year including 888.com, Betfair and Empire Online.
Mr Cattaneo said: "The healthy IPO pipeline we reported in the first quarter is growing, so there is a great deal of pent up activity which should provide a strong second half."