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Alternative market that plays a vital role in the nation’s wealth creation

As the global and UK economy adapts to the impact of Covid-19, many of the UK’s listed companies have been at the front line of innovation and recovery.

Tuesday, 30th June 2020, 6:12 am

Bod Buckby, Head of UK Primary Markets North, London Stock Exchange Plc

These have included biotechnology companies working on testing and treatments, such as Wetherby-based Avacta and Manchester-based Genedrive, as well as manufacturers utilising their capabilities to produce personal protective equipment.

Many of these companies are quoted on London Stock Exchange’s AIM, which this month celebrated 25 years of supporting growth companies.

Over 3,800 companies have raised a combined £118bn in capital on AIM during the past 25 years, making the UK home to one of the most successful growth markets in the world. Of the

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capital raised, 39 per cent has been raised at IPO and 61 per cent through further issues of shares once public. This highlights the long-term support provided by investors to companies on the market.

Crucially, AIM has not only adapted and evolved to meet the needs of growth companies and their investors, it has also remained resilient through economic cycles, and has a vital role today supporting business in the recovery from the Covid-19 pandemic.

Since March 2020, AIM-quoted companies have raised over £2.1bn in further capital, not only to strengthen balance sheets but to fund innovation and growth. This underlines an important function of public markets: the ability to raise repeat rounds of permanent capital for investment.

AIM companies’ ability to efficiently raise long-term patient capital enables them to support growth and create employment. Recent research from Grant Thornton has found that, in 2019 alone, AIM companies contributed £33.5bn Gross Value Added (GVA) to UK GDP and directly supported more than 430,000 jobs, an increase of 35 per cent and 22 per cent, respectively, over the past five years.

When taking into account economic activity through their supply chains and the expenditure of employees in their local economies, the overall economic impact of AIM companies is even larger – equivalent to £67.2bn in GVA and over 900,000 jobs.

Almost 60 per cent of the UK-incorporated AIM businesses are based outside London, demonstrating their important role in regional economic development and employment across the UK.

Admitted to AIM in May 2018, Wakefield-based video games developer and publisher Team17 has been a constant innovator. Through AIM, the company was provided with ready access to additional financial capacity to support future M&A plans. Moreover, it gave the company an enhanced profile and credibility among its international partners and enabled it to attract high-quality talent to support its growth plans.

Similarly, Manchester-based The Pebble Group floated in the largest AIM IPO of 2019, enabling the company to clear its debt and fund future acquisitions in the forms best for its business.

AIM’s ecosystem of entrepreneurial companies, long-term investors, nominated advisers, brokers and intermediaries has been key to its success. Retail investor participation has also been key vital to AIM throughout its history. By enabling retail and institutional investors to access growth, AIM plays a vital part in the nation’s wealth creation.

We have worked with the UK Government to ensure that fiscal incentives such as EIS, VCTs and Business Property Relief support long-term growth and enable companies to transition from private ownership to the public market as seamlessly as possible without facing funding gaps.

Similarly, the eligibility of AIM shares for ISAs and exemption from stamp duty have improved the efficiency of the market, making it more attractive for both retail and institutional investors, and this in turn has increased the availability of capital for companies. We welcome the Government’s continued support for SME growth markets in the UK through public policy and the tax system.

SMEs are the lifeblood of the UK economy, driving growth, innovation and job creation, and these companies will be key to building a new post Covid-19 economy. Providing access to capital at all stages in a company’s development is a key contributor to success and we have a long-term commitment to supporting these entrepreneurial firms into the future.