AIM and Aquis: London’s junior stock markets under threat without ‘urgent action’ from Reeves
The government must take “urgent action” to revive London’s junior stock markets AIM and Aquis or risk more firms flooding overseas this year, a top City group has warned.
In a new report today, The City UK, a trade body representing the UK’s financial services sector, called on the Chancellor Rachel Reeves and financial regulators to more easily allow amateur investors to access smaller exchanges and establish a new “growth markets industry group” to champion the needs of smaller exchanges.
Regulators should also intervene to streamline the way the way that smaller firms can graduate from AIM on to London Stock Exchange’s main bourse, the group warned, amid fears that too few companies are making the transition.
“The health of the UK growth markets is the responsibility of all who engage with them, and we urge the government and regulators to work with industry to supercharge their competitiveness, ensure they can continue to support innovative and growing companies, and enable growth right across the country,” said Miles Celic, boss of the City UK.
The warnings come after more than 90 firms ditched their listing on the London Stock Exchange’s AIM exchange last year as the bourse shrank at its fastest pace on record.
Both AIM and its rival Aquis, which is set to be bought by Swiss exchange operator SIX, have also been hit by a dearth of new IPOs as firms shun the public markets and stay private for longer.
Celic warned that a “lack of focus” on the smaller exchanges from government and regulators, as well a dwindling pool of international investors, had forced firms to access capital in foreign jurisdictions.
Fears over the future of AIM grew last year when Rachel Reeves slashed by half a key inheritance tax relief on AIM shares.
In a separate report last month, AIM-listed broker Peel Hunt warned of an impending “swarm of takeovers” on the market this year as investors snap up listed firms on the cheap.
Some 33 per cent of small and mid-cap AIM businesses are “vulnerable to acquisition” this year due to a lack of liquidity, depressed valuations and reduced ability to utilise the capital markets, Peel Hunt warned.
The City UK’s calls come after a volley of warning shots over the future of junior exchanges in the past 12 months and calls for Reeves to step in with firmer fiscal incentives to encourage investment.
Fund manager Abrdn and the Quoted Companies Alliance were among the voices last year urging the Chancellor to slash a stamp duty on share trading for smaller companies in order to encourage investment.
A Treasury spokesperson pointed to the floats of computer firm Raspberry Pi and media giant Canal+ last year and said they “demonstrate confidence in our capital markets”.
“We want to continue attracting exciting businesses to the UK,” the person said. “That’s why we are creating pension megafunds to unlock billions of pounds of potential investment for businesses, working with our regulators to develop ambitious plans to support growth and backing the largest overhaul of UK listings rules in decades.”
While the Financial Conduct Authority overhauled its listing rules last year, the changes only apply to the main market.
The FCA was contacted for comment.