London’s Alternative Investment Market Faces Exodus Crisis
Britain’s policymakers are struggling to revive the country’s capital markets as a growing number of companies are abandoning London’s Alternative Investment Market (AIM). This 30-year-old segment of the London Stock Exchange was designed to help smaller companies secure capital, but now many AIM members are considering delisting or selling themselves due to slumping market valuations and changes in Britain’s tax rules.
AIM’s Decline Accelerates
In 2025, Alliance Pharma agreed to sell itself to asset management firm DBAY Advisors, and online marketing firm Team Internet received takeover approaches from private equity bidders. This trend is expected to continue, with bankers and financial advisers warning that the exodus will accelerate into 2025. A total of 89 companies left the junior exchange last year, with just 18 joining, compared to 2021 when there were 54 departures and 66 additions.
Vulnerability to Bids
An estimated third of AIM companies with a market value of £50 million to £250 million are vulnerable to bids, according to Peel Hunt. AIM stocks are trading at 30% to 40% below their 10-year average, as investors have pulled out more cash from UK funds. This has led to a lack of IPOs, which has been accompanied by a long spell of outflows from UK funds.
Consequences of AIM’s Demise
The disappearance of AIM would be catastrophic, as it would be an admission that Britain is not interested in supporting entrepreneurs, startups, and growth businesses. AIM’s decline would also have significant implications for the UK economy, as it would lead to a loss of job creation and tax revenue.
Catalysts for Exit
The halving of inheritance tax relief has been a recent catalyst for some AIM-listed companies to exit the index. Previously, owners of AIM-listed businesses were allowed full exemption from inheritance tax on their shareholdings, but now they face an effective tax of 20% on their holdings.
Solutions to Reverse the Decline
To reverse the decline, experts suggest mandating operators of pension schemes to allocate a minimum percentage of their assets to the UK. Another solution could be reinstating plans for UK tax-free savings accounts that invest in British stocks. Additionally, analysts are seeing a reversal in equity flows into Europe that could stem the tide and bolster new issues in London.
A Broader Problem
The problems facing AIM are also being felt on the main exchange, which has seen the number of IPOs shrink and a swathe of large take-private deals in the last year. Some companies are also shifting their listings to the U.S. to achieve better valuations. To address this issue, Britain needs to fix its capital problem, which will in turn fix the IPO appetite of private companies.
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