Chancellor urges protection for London’s junior stock market funding

The London Stock Exchange's junior market, known as Aim, is facing potential threats due to proposed changes in inheritance tax relief. Julia Hoggett, the chief executive of the London Stock Exchange, has warned that the ongoing viability of Aim could be jeopardized if the government decides to eliminate the 100% business relief from inheritance tax. This relief is crucial for investors, as it allows for significant tax savings on shares held for a minimum of two years. Currently, Aim has a total capitalisation of approximately £75 billion, with around £11 billion attributed to investors benefiting from the existing tax relief system. Analysts predict that the removal of this relief could trigger a sharp decline in share prices, with estimates suggesting a drop of 20%-30% across the Aim index. Such a reaction could lead to a rush of selling, exacerbated by the already low liquidity in the market. Despite criticisms of Aim as a lightly regulated market with a history of scandals, it has played a vital role in funding small and medium-sized enterprises. Since its inception in 1995, companies have raised £135 billion through Aim, with a notable focus on technology firms. The potential removal of the tax break raises concerns about the future of these businesses and their access to capital. In light of these developments, the government faces a dilemma. While the tax relief may distort investment choices, its sudden removal could create a significant funding gap for growing companies, undermining the government's stated commitment to fostering economic growth and innovation.