This will-we, won’t-we budget is causing economic harm
By Dru Danford, Head of Investment Banking
Watching the will-we, won’t-we budget commentary unfold over the past few months has been painful and has caused significant uncertainty across the market. Not to mention that delaying the budget to October following the July election was a misstep, it has resulted in drawn-out public scrutiny of the multitude of possible tax changes on the table. This unnecessary speculation about what might or might not happen has dampened the more positive economic mood that existed around the election.
There is one policy that has not as yet been denied; speculation around the removal of Business Relief (BR) for shares quoted on AIM, which means that qualifying companies would no longer be free from inheritance tax. And whilst there has been no suggestion from any government document that there will be a change, market participants are worried that a change could be on the cards. A change to BR for AIM shares could have significant implications for both AIM and the London capital markets ecosystem longer term with a change potentially causing material outflows from the AIM market and quite possibly a material correction. The volume of concern in the market is notable and the topic won’t die down – suggesting there is no smoke without a fire. Unhelpfully, in concert some are even speculating that the AIM market should be shut down and replaced with one which has more time-limited, tax and regulatory benefits.
The AIM market has been a huge UK success story, a market unique to our financial ecosystem, raising billions of pounds from both institutional and retail investors for start-up companies that go on to invest and create jobs across the UK. A recent study by Grant Thornton provided compelling evidence about AIM’s contribution to the UK economy, estimated at £68bin 2023.
Growth businesses, such as those listed on AIM, are the backbone of the economy, and the government needs to encourage, not curtail the conditions for their success. It would be far more helpful if the debate was more centred around crafting a better investment culture in the UK, with the ambition of more flows into our markets including AIM. Speculation of a policy change has already caused substantial damage to the market, and the further harm that any ill-thought-out change could cause, should not be underestimated. And, on the assumption that the Government does not want to upset this growth ecosystem, the Chancellor should confirm sooner rather than later that they have no intention of changing the status of AIM or altering the benefits to investors in that market.
This article was first published in CityAM.
