AIM Celebrates 30 Years: Is the Future Uncertain for This Small Company Stock Market?

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London’s junior stock market AIM looks more fragile now than at any time in its history as the bourse marks its 30th anniversary.

Any celebration of the milestone on Thursday 19 June 2025 among AIM-listed companies and their investors is likely to be muted after several years of disappointing performance, as well as fading size, value and, perhaps, relevance.

AIM was launched in 1995 in efforts to fund ambitious, scaling small and medium-sized companies that drive innovation, exports and regional growth.

But discouraged by feeble liquidity and trading volumes, as well as the more burdensome cost of operating as an AIM company than a private one, many firms have called time on their listing.

Meanwhile, the chief concern for many market watchers is that far fewer are coming to replace them.

Some 1,694 companies traded on AIM at its 2007 peak, but this has plummeted to just 650 today, with a further 60 firms estimated to be planning to leave, according to broker Peel Hunt.

And those companies that depart the index are rarely doing so to join London’s main market, with just two firms taking on promotion last year.

AIM aversion may also be attributed to performance. The AIM index has fallen 6.3 per cent over the course of its 30-year lifetime, compared to gains of 454 per cent and 559.6 per cent from the FTSE All-Share and FTSE Small Cap Index, respectively, BestInvest data shows.

AIM was launched in 1995 in efforts to fund ambitious, scaling small- and medium-sized companies that drive innovation, exports and regional growth.

Yet, while the index’s overall performance may have disappointed, there have been individual companies that have made huge share price gains along the way.

Adrian Murphy, chief executive of Murphy Wealth, said: ‘It is difficult to say AIM has been a massive success, either in terms of its purpose of creating an incubator for the main market, or as a way for investors to gain exposure to high-growth UK companies.’

But AIM is still responsible for almost £136billion in funds raised by more than 4,000 companies, while its investors have enjoyed billions in dividends.

And the Government may be reticent to let the market wither further.

AIM is estimated to have contributed £68billion to the British economy and poured £5.4billion via tax receipts into government coffers in 2023 alone, while the market is said to support more than 778,000 jobs across the UK.

The average AIM employee also contributes £87,000 to UK economic output, which is over 50 per cent higher than the national average, according to Unicorn Asset Management figures.

Unicorn fund manager Simon Moon said: ‘While market conditions are challenging, AIM’s core role remains vital. If the UK is serious about backing innovation, improving productivity, and supporting growth across the regions, AIM should be seen as a cornerstone of that ambition.’

So can the market be revived?

AIM has consistently underperformed small cap FTSE peers

What next for AIM: help or hindrance?

As part of the Government’s drive for economic growth, efforts have been to channel more capital into UK assets. This stands on the help side of the ledger for AIM.

The Mansion House Accord agreed last month with 17 UK pension providers is intended to drive £50billion into UK businesses and major infrastructure projects, with revitalisation of AIM part of its mission.

Luke Barnett, head of tax advantaged investments at St. James’s Place: ‘If the UK really wants to drive growth and support smaller firms, AIM should be part of that strategy.

‘Strong and swift delivery of initiatives like the Mansion House reforms could improve sentiment and confidence, and a thoughtful balance between measures to provide smaller companies with access to capital markets, alongside greater regulatory certainty and investor safeguards could also help restore trust and participation.’

However, when it comes to being a hindrance, tax changes made in Chancellor Rachel Reeves’ budget in October last year provided a hammer blow to one of the key drivers of AIM investment.

From 6 April next year, inheritance tax relief for qualifying AIM shares will be restricted to 50 per cent of the bill. Previously, they were IHT free after the qualifying holding period.

This means an AIM portfolio worth £1million over and above someone’s standard inheritance tax allowances, which would have passed IHT-free, will now attract an IHT bill of up to £200,000.

Jason Hollands, managing director at Evelyn Partners, said IHT had been ‘a key reason why entrepreneurs have taken their companies on to AIM in the first place’ while a ‘not insignificant amount’ of the AIM market is owned by ‘third-party investors specifically seeking to mitigate a potential IHT liability’.

He added: ‘These have been an important source of capital for companies in AIM.

‘From April 2026, business relief on AIM shares will be halved, so there will be an effective IHT tax rate of 20 per cent applied.

‘While something is better than nothing, it will reduce the attractions for those weighing up whether the risks of taking positions in small, under researched companies is worth the potential tax savings.’

Rob Burgeman, wealth manager at RBC Brewin Dolphin, said the IHT relief had proven to be ‘a double-edged sword’, as many AIM firms capable of moving to the main market ‘decide not to because the investment vehicles that own them would then be forced to sell’.

However, he added: ‘If the tax breaks were to be weakened further, it could precipitate a rush of money out of an already illiquid market.’

There are also concerns the recently announced PISCES platform for trading shares in private companies could further erode interest in AIM – and mean even more companies staying private for longer.

Diminishing relevance or ripe for revival?

The AIM market has seen a few success stories over the year, notably Genus, Breedon and Melrose, but those victories have become increasingly rare.

But the deterioration of AIM must be placed in the wider context of the UK markets’ relevance among international investors.

The UK accounts for just 4 per cent of the MSCI World index, ‘falling from more than double that when AIM was originally launched’, according RBC Brewin Dolphin’s Burgeman.

He said: ‘The large cap index is known to largely be made up of financial, resource, energy, and pharmaceutical companies, as opposed to a market like the US which is more characterised by technology stocks.

‘While you may expect AIM to be filled with young, fast-growing companies, it mostly reflects the UK as a whole.’

Burgeman added: ‘It is hard to say the index has been a phenomenal success – albeit there have been some good companies that have outgrown the index and gone on to bigger things. But, it hasn’t exactly been the conveyor belt of success stories many would have hoped for.

‘Some real success stories in the near term will be key. But, until that happens, AIM may remain a nice idea in theory, but disappointing in reality.”

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