The UK’s Alternative Investment Market (AIM) has shrunk to its smallest size in over two decades as businesses and investors brace for a potential end to inheritance tax (IHT) relief in this week’s budget.
AIM, London’s junior stock market, has lost a total of 92 companies in the past year, reducing its listings to 695 — the lowest count since 2001, according to data from accountancy group UHY Hacker Young.
This downsizing reflects rising concerns among companies and investors regarding potential tax policy changes under Chancellor Rachel Reeves, who may cut IHT relief on AIM shares.
Since the general election in July, 26 companies have delisted from AIM, with the number of new listings hitting a low, as only ten companies joined the market over the past year.
AIM has also seen a 6% decline in market value since Labour’s election win in July, while the larger FTSE 100 index remained flat. The slump has been more severe since former Prime Minister Rishi Sunak called the election in May.
Shrinking Market Signals Economic Challenges Ahead
AIM, established in 1995, serves as a capital-raising platform for smaller, high-growth companies, helping them attract investors by offering business property relief, which exempts shares from IHT if held for more than two years. This tax relief has long been attractive to wealthier families looking to pass on wealth untaxed to heirs.
However, uncertainty about the continuation of this tax break is deterring some companies from listing, further shrinking AIM’s appeal in the market.
“As AIM experiences a further glut of companies leaving the exchange, the government needs to urgently address how it can help. Cutting IHT relief on AIM shares would do the opposite,” said Colin Wright, partner and group chair at UHY Hacker Young.
He urged the government to increase incentives to attract smaller companies and investors back to AIM, noting the need for supportive policies in the face of declining interest.
Wealth management experts share this concern, particularly regarding the shrinking liquidity on AIM, as investors increasingly turn to passive, or tracker, funds. Dominic Tayler, managing director at Oakglen Wealth, said that 15% of AIM shares are held through business relief-based funds for inheritance tax purposes.
AIM’s falling liquidity, he noted, partly reflects the shift in investor focus from smaller stocks to passive funds that track the primary markets.
“Speculation around the removal of business relief for AIM in the forthcoming budget has compounded this. Not only is this bad for business, it also harms long-term savers who are the lifeblood of private investment.”
Dominic Tayler
N Brown, a British online retailer, is one of the companies that recently left AIM. The company accepted a takeover bid from Joshua Alliance, who argued that N Brown no longer benefited from its AIM listing, as it faced “significant costs” associated with remaining on the exchange. Alliance’s decision signals a broader trend among companies assessing whether the burdens of AIM listing outweigh the benefits.
Despite these recent exits, AIM remains an economic contributor. A study commissioned by the London Stock Exchange Group (LSEG) found that AIM companies contributed £68 billion in gross value added last year and paid £5.4 billion in corporation tax.
Marcus Stuttard, head of AIM and UK primary markets at LSEG, noted that AIM has supported over 4,000 companies in raising nearly £135 billion since its inception.
“As AIM turns 30, we should celebrate the success of companies past and present who have made such an important contribution to our economy. But it is vital that we protect the market and its structures so that companies in the future can continue to support this positive legacy of economic growth and deliver returns for investors and savers.”
Marcus Stuttard
The imminent budget announcement has raised concerns that further restrictions could erode AIM’s role as a vital support system for smaller companies in the UK economy. With businesses, investors, and industry experts awaiting clarity on government policy, AIM’s future stability and growth may depend on whether incentives for new listings and protections for existing investors are prioritized.
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