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The “ongoing viability” of London’s junior stock market would be threatened if the government removes business relief (BR) from its shares in next month’s budget, the exchange’s owner has warned ministers.
Sky News has obtained a letter sent by Dame Julia Hoggett, the London Stock Exchange (LSE) chief executive, to Tulip Siddiq, the City minister, which includes a stark alert about the potential impact on the Alternative Investment Market (AIM) of radical tax moves next month.
In it, Dame Julia expresses concern about “the current fragility of the market and this concern is shared by companies and fund managers across the market”.
The AIM market, which is positioned as the LSE’s international exchange for growth companies, has contracted from from 819 companies with a combined value of £131bn at the end of 2020 to 704 companies now valued at approximately £76bn, according to Dame Julia.
The LSE chief said removing BR from AIM shares – a fundamental part of the appeal of London’s junior market – “would remove a core source of capital undermining the market’s capital base and bringing its viability into question over the short to medium term”.
She added: “An announcement of the removal of BR in the budget is likely to result in significant market volatility as individual investors and IHT funds seek to liquidate holdings in companies that have been long-term beneficiaries of BR investment.”
And she warned: “Given the illiquid nature of smaller companies, we are concerned that this volatility would have a disproportionate impact on share prices across the market.”
Dame Julia’s letter amounts to the starkest warning to date from the exchange about the future of the AIM market, which has provided a model to other international exchange operators but which has been beset by concerns about a lack of liquidity and corporate governance issues at some of its companies.
“Given the concerted effort being made to improve the funding environment in the UK…
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