This is what quoted companies need to grow
Despite Tube strikes, the QCA Annual Dinner celebrates UK small and midcap success while urging the government to scrap stamp duty, rethink ISAs, and boost liquidity to strengthen public markets and drive economic growth, says James Ashton
It will take more than an irritating Tube strike to stop hundreds of business leaders, their advisers, investors, regulators, politicians and the media from converging on the British Museum tonight.
When tariffs, taxes and the tussle for talent impact daily decision-making, I know the ever-resilient small and midcap business community that makes up the Quoted Companies Alliance membership won’t be put off by a bout of pesky industrial action.
Our QCA Annual Dinner is a chance to celebrate great British success, from Canada to the companies supported by the UK’s capital markets that are based right across the country. And we do it without hurriedly handing out a dozen gongs in 20 minutes to a techno backing track. Everyone is a winner tonight, including our much-decorated after-dinner speaker, the Olympic rower Baroness Katherine Grainger, and AIM itself, the growth market that has been a launchpad for thousands of young companies and emerging sectors in its first 30 years.
But sustained success needs the right sort of support, which is why our membership, even with glass in hand, already has one eye on the Budget on 26 November. And as much as has changed in the public finances and with the darkening of global geopolitics, much has stayed the same.
It is business that creates economic growth. Backing our members is a surefire way to deliver growth, a much-needed upturn in productivity and narrower regional income inequality. That’s because they are based from the West Midlands to the East End of London, from the South Coast to North Yorkshire – operating transparently in everything from breakthrough biotech, high-tech payments, innovative defence and UK manufacturing.
Scrap stamp duty
Scrapping stamp duty on share trading would be an ideal start to the Chancellor’s speech 11 weeks’ hence. It would electrify public markets, wave a magic wand over business relations and send out an unmistakeable signal to international investors. That £3bn investment would pay off in spades.
So too would rethinking ISAs, a regime which costs the state £5bn a year to sustain. Keep it as a powerful, well-understood UK relief, but one that benefits UK companies in lockstep with UK investors. No need to diminish cash ISAs; no need to subsidise investment in Nvidia and Apple either.
Three other measures the QCA is calling for would benefit smaller companies specifically. Never forget that more than half of all companies whose shares trade in London have a market value of less than £100m. That ecosystem has been under some strain but – trust me – its vibrancy is the envy of many financial centres around the world. We just need to do a little more to pump-prime investment and give bosses more certainty to get on with the job.
Greater liquidity, more buyers and sellers, tighter spreads: getting this right is about more than easing traders’ stress levels. More investment means higher share prices, company valuations, blossoming confidence and therefore an eagerness to recruit, to innovate, to export. It’s a virtuous circle for AIM stocks such as the exciting Newcastle biotech SkinBioTherapeutics and Cohort, a defence group sustaining high-value jobs in Reading, Plymouth and Lincolnshire. I’m delighted that both have taken tables with us tonight.
What moves the dial would be to expand the limits on the use of venture capital trusts (VCTs), a vital channel for supporting early-stage enterprises. So too would directing the British Business Bank to invest directly in AIM and Aquis companies struggling to bridge the funding gap. Its presence would give other institutions cause to look again at this part of the market.
And then there is Business Property Relief, an incentive that has drawn billions of pounds of otherwise unproductive assets – largely cash – into supporting growing companies. For most investors, BPR has little to do with family firms and even less with farming. And its cost to the Exchequer appears modest when set against what it delivers. Since its reduction from 100 per cent to 50 per cent relief on inheritance tax last October it adds up to less than £100m a year.
Retaining an incentive is very welcome, although we reckon last year’s change has drained at least £1bn from AIM. If it can’t be unwound, committing to BPR at this level until 2035 – in line with other investment schemes – would be a boon. That’s not extra cost, just extra certainty. If we can collectively get that right then I’m sure even more companies will gather to celebrate at the British Museum this time next year.
James Ashton is chief executive of the Quoted Companies Alliance