AIM listings hit 23-year low amid Budget tax speculation

The number of AIM companies has fallen below 700 for the first time since 2001, new data has confirmed, as London’s junior market has been battered by speculation that a key tax relief for AIM shares may be scrapped in this week’s Budget.

Some 92 companies have delisted from AIM in the past year, with the total number of companies on the exchange sitting at just 695, according to new data from UHY Hacker Young.

Shares on the junior market currently enjoy an inheritance tax break if they have been held for at least two years, but Chancellor Rachel Reeves has reportedly been mulling ditching the relief in a move which could raise around £1.6bn a year, according to the Institute for Fiscal Studies.

However, City broker Peel Hunt has warned that shares could dive as much 25 per cent should Reeves decide to end the relief, as billions of pounds are pulled from AIM by funds set up to take advantage of the tax break.

“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.

“With fewer companies now listed on AIM, and with fewer companies looking to join, the government should be looking at maximising incentives for both companies and investors in small caps.”

Other issues that have plagued the junior market for years continue to persist regardless of rumours over inheritance tax, such as the high cost of listing and the bureaucracy involved.

An IPO on AIM will cost about £500,000, and fees for RNS announcements, legal costs, and other expenses cost firms around another £200,000 a year.

Around 1 in 10 of delistings from AIM over the last have been, according to the companies themselves, due to the cost of complying with AIM regulations.

“We’ve been warning for some time that the cost of listing on AIM has become too expensive,” added Wright.

“Due diligence and ongoing reporting obligations have also become too onerous. This, evidently, is leaving little incentive for some companies to remain listed on the market.”