The toughness of trading in the City's financial markets over the last three months was put firmly in the headlights today, as the London Stock Exchange (LSE) revealed a significant slowdown in revenue growth in its first quarter trading statement.

Clara Furse, chief executive, was noticeably less upbeat today than at the time of the Exchange's full-year results two months ago.

Back then she talked of testing conditions but of an "encouraging start to the new year."

Today her tone was more cautious as she said: "The Exchange has delivered a good performance, achieving growth despite weak market conditions in a changing regulatory landscape.

"The quality and diversity of our operations and unique international brand highlight the resilience of our business in what are highly uncertain market conditions."

The shares, which fell by more than 7% yesterday on fears today's update might have been worse, recovered two thirds of that loss rising 381/2p to 7091/2p.

The LSE said that revenues in its first quarter rose by just 8% to £178 million, but by only 3% if one takes out the positive effects of exchange rate movements. For the full year to end-March revenues rose by 56%.

Evidence is rife that both new issue business and actual share trading has slowed down markedly as the credit crunch has forced both companies and investors to delay their ambitious plans.

The LSE said that revenues from its issues department were flat in the last three months with the number of new share issues almost halving from 140 to just 73.

The total money raised on the LSE was actually well ahead, up from £17 billion to £31 billion including some massive foreign listings and rights issues, including the Royal Bank of Scotland's £12 billion fund raiser.

Revenues from trading rose by just 1% to £75.1 million as investors decided that the imminent bear market in London was not the time to be piling into equities. Furse described that as a "resilient" performance, but set against the 53% rise in trading revenues last year the downturn is extreme.

In April, UK share trading volumes were flat, in May they fell 1% and June saw them down 8% to give an overall fall of 8% across the quarter. Analysts believe that there is no reason to expect any immediate pick up in volumes and indeed fear they could sink lower as the bear market grip tightens.

Furse made no immediate mention today of the appearance of rival trading platforms including Chi-X, which is already capturing some of the LSE's market share, and Turquoise which launches next month. The LSE is going ahead with its own venture with Lehman Brothers for a system to trade so called "dark pools" of liquidity off the main market.

But last month the LSE lost out in the bidding to develop a major new financial exchange in the Middle East when it was outbid by NYSE Euronext to become a partner in the $1 billion (£507.7 million) Dohar exchange in Qatar.