Concerns mount over the role of Aim
As its 30th anniversary approaches, questions are being asked about the future of Aim (Alternative Investment Market). Established in 1995 to support early-stage ventures, the market now faces challenges with firms exiting and a potential loss of a valuable tax break.
A recent article in the Times questions the relevance of Aim and argues that London’s junior stock market needs a boost. The piece notes how firms like Rome Resources, a Canadian mining company, recently listed on Aim to secure funding from London investors that seem more comfortable with African projects. While Rome Resources was the type of company that Aim was created to serve, the number of companies on Aim has dropped significantly since its peak in 2007, raising concerns about its effectiveness in developing new businesses.
A number of high-profile companies have left Aim, sometimes due to takeovers, including Keyword Studios and Hotel Chocolat. Others, like Redx, believe they can raise funds more easily as private entities. Meanwhile, companies like Active Energy Group have been delisted after failing to meet their goals. “This might not matter if new companies were racing to list on Aim — but they are not,” writes the Times.
Warnings are also being made that the situation might worsen if Chancellor Rachel Reeves ends a tax break that allows Aim investors to avoid inheritance tax if shares are held for over two years. Julian Morse of Cavendish, Aim’s largest broker, warns that this could devastate the market by removing crucial funding sources, and would go against the government’s growth agenda.
Aim’s performance has also been criticised, with the Aim All-Share index showing a negative return since 1996, compared to significant gains by the FTSE 250 over the same period. While its reputation as a high-risk market has improved, past scandals at companies like Patisserie Valerie and Quindell have damaged investor confidence.
Despite these issues, Aim still supports successful companies like Jet2 and Young’s Brewery. Marcus Stuttard, head of Aim at the London Stock Exchange, argues that the market’s value has grown and that the challenges facing Aim are part of a broader, global problem.
One notable success story is car dealership Vertu, which used Aim to fund its growth and become the UK’s fourth-largest car seller. “That’s what Aim is there for and should be still there for — to provide early-stage capital to allow management teams to develop businesses,” said Forrester.
Aim might face significant challenges, but its ability to support new and growing companies remains vital. Ongoing improvements and policy adjustments could help revitalise the market and ensure it continues to play a valuable role in London’s financial landscape.
