Smaller companies investment opportunities should be made available if the private sector is to drive UK economic growth, the London Stock Exchange has said.
In its response to the government’s ‘Financing a private sector recovery’ green paper, the Exchange said the success of the UK economy would be built on the performance of high growth small and medium sized companies.
The Exchange is calling for the government to amend ISA rules to allow investment in unlisted companies like those on the alternative invesment market (AIM.)
“The incremental investment that could result from AIM shares being made eligible for ISAs would partially offset the capital and liquidity that has been withdrawn from smaller companies during the financial crisis,” the response said.
Head of the AIM at the Exchange – index for SME companies – Marcus Stuttard said: “The targeted proposals outlined in this submission will help attract a wider set of investors to growth companies, providing them with vital initial capital and supporting deeper liquidity in the trading of their shares, generating a virtuous circle of investment and growth.”
Research by the accountancy firm Grant Thornton, included in the submission, showed that in 2009 UK incorporated smaller companies contributed £12billion to the UK economy, and £1.8billion in tax revenues.
The paper said the historic performance of AIM companies indicated average growth of 35 per cent in turnover a year after joining the market.
By value of investments, the top two most influential institutional investors in AIM are BlackRock Merrill Lynch Investment and Invesco. Lloyds Banking Group, Fidelity International, Artemis and Schroders also feature in the top 10 highest value investors in AIM companies.
Venture Capital Trusts – tax incentivised funds for investing in smaller companies – should be able to participate in the secondary market, the Exchange added.
Increasing the asset ceiling for trusts and other regulatory changes would make investment capital available to a wider pool of companies, the paper suggested.
© Fair Investment Company Ltd