GOVERNMENT plans to float QinetiQ on the Stock Exchange have been put on hold due to deteriorating market conditions and the fall-out from the Railtrack affair.

The Ministry of Defence originally announced two years ago that it hoped to launch an initial public offering (IPO) of the Malvern-based company in 2001, to raise a possible £250 million.

That deadline has now been pushed back until at least this summer.

An MoD spokesman said: "The situation is that we're aiming to achieve a commercial solution for QinetiQ if the conditions are right. It will be judged right when the best value from the divesting of the company can be achieved."

The market for IPOs all but dried up in 2001 and British stock markets have fallen for the second year in a row. An upturn is forecast for later this year.

"The ideal time internally, we thought, is June 2002," said Liz Peace, director of corporate affairs at QinetiQ, Malvern's largest employer. "But it's not our decision, it's an MoD decision. They have to take into account a number of factors including the state of the markets.

"The preference is for an IPO, preferably next summer. If the market conditions are not suitable, the fallback option is to sell a certain percentage to strategic financial investors, such as private equity funds."

The furore over the placing in administration of Railtrack by the Government has further worried the markets as QinetiQ is also a privatised company that relies heavily on the Government for its income.

"In terms of the markets, it makes people jittery," said Ms Peace. "But QinetiQ is such a strong story that investors should see it differently."