Two prominent think tanks have recommended scrapping London’s junior stock exchange as part of essential reforms to attract rapidly growing companies and revitalise the UK’s capital markets. The Tony Blair Institute and the centre-right think tank Onward have declared the UK’s capital markets as “not fit for purpose,” requiring “radical surgery.”
Historically the world’s leading stock exchange, London now ranks sixth, having missed out on several significant new listings from tech companies. Companies like building materials group CRH and gaming company Flutter have moved their primary listings to the U.S. to enhance their valuations. Similarly, Arm, a chip designer based in Cambridge, chose a U.S. listing over a UK one for a higher valuation.
The report criticizes the London market for relying on “legacy firms” in sectors like energy and finance, which lack the growth potential of tech companies. It states, “Aim has failed to serve its intended purpose of providing a platform for scaling businesses. It should be fully merged with the LSE’s main market, establishing a special pathway for listing high-growth technology firms.”
The think tanks also recommend maintaining tax incentives for investors in junior market stocks that pursue high-growth trajectories.
Despite 76 companies delisting from London’s Aim market last year and critiques from executives of the UK’s most dynamic companies about not considering London for listing, the market is experiencing a drain due to low liquidity, diminished investor confidence, and a shrinking capital pool.
Zachary Spiro, a policy fellow at Onward, notes, “The UK’s capability to fund growing tech companies is at risk, but the decline is not inevitable.” The report suggests cutting red tape and creating a “Growth Capital fund” with £1 billion to establish five large-scale growth investors focusing on science and tech firms.
Benedict Macon-Cooney, chief policy strategist at The Tony Blair Institute, emphasizes the urgency of reform to regain Britain’s former financial prominence, aiming to attract top talent, build superstar companies, and enhance the nation’s economic stature in the modern world.
Conversely, other segments of the City advocate for measures to support the Aim market. Barclays, for instance, has proposed tax reliefs for investors in companies transitioning from the junior to the main market.
James Ashton, CEO of the Quoted Companies Alliance, argues that Aim is vital for growth companies not yet prepared for the main market, stating, “Its loss would limit UK funding options and enforce a rigid regulatory and governance framework that disadvantages small, entrepreneurial stocks.” He warns that without Aim, fewer companies might pursue IPOs, and more quoted companies could revert to private status, noting that many Aim stocks don’t meet the main market’s minimum market value requirement of £30 million.
