VCT ban on AIM companies needs to go

AIM-listed companies contribute a total of £21bn to UK GDP, and support some 570,000 jobs, but they’re still far from reaching their full potential. Lifting the ban on venture capital trusts (VCTs) investing in AIM can bring the London Stock Exchange’s (LSE) growth market to the next level.

Companies on AIM need greater fiscal incentives and fewer restrictions on them to make the biggest impact on Britain’s economic recovery, a report by Grant Thornton for the LSE says.

“If AIM is to continue as the world’s leading platform for growth companies looking to raise capital, we need to lift unnecessary restrictions on the investment criteria by VCTs and reverse the gradual erosion of fiscal incentives,” comments Stephen Gifford, chief economist at Grant Thornton.

Indeed, incentives for investing in AIM companies have gradually eroded over the past few years – getting rid of Business Asset Taper Relief and the introduction of tighter restrictions on investment criteria for VCTs have particularly affected investor appetite in AIM.

“Restrictions that mean relatively few AIM companies are eligible for investments by VCTs are obviously counterproductive,” adds Gifford. “VCTs are a vital catalyst for AIM, often acting as an anchor investor that encourages other institutional funds to invest in the same company.”

AIM companies directly contribute around £12bn to GDP and employ around 250,000 people. A further £9bn of GDP and 320,000 jobs are supported indirectly through supply chain and multiplier effects.

Commenting on the report’s proposals, Marcus Stuttard, head of AIM, says: “AIM is already a hub of entrepreneurial activity, but it’s vital that the market can draw on the most supportive business environment possible if it is to achieve its full potential in helping power economic recovery.”

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