AIM: The Future Need Not Be So Bleak

The Alternative Investment Market (AIM), operated by the London Stock Exchange (LSE), is designed to act as a launchpad for growth-oriented companies, offering earlier and more flexible access to capital than the Main Market or comparable global exchanges.

With its lighter regulatory framework and reliance on nominated advisers (NOMADs) for oversight, AIM has been a critical component of the UK's financial ecosystem but is now under growing scrutiny amid declining listings and fragile investor sentiment.

Strengths of the AIM model

AIM provides access to capital, regulatory agility, reputational benefits and a supportive ecosystem of advisers and investors. Admission to listing is easier and lower cost than Main Market or other comparable global exchanges, providing an exit for original investors and a platform to raise capital for growth companies.

Secondary issues can be executed quickly, allowing companies to seize opportunities and secure funding for urgent growth initiatives. This ability to raise follow-on capital efficiently helps businesses to align fundraising with their growth trajectory.

NOMADs play a pivotal oversight role in AIM as expert advisers. They work alongside legal counsel, sector specialists and financial professionals, to provide strategic guidance, conduct due diligence and ensure compliance. As regulatory gatekeepers, NOMADs uphold AIM's principles-based rules tailored to each company. This model ensures good governance without imposing the rigid requirements typical of more traditional markets.

AIM listed companies gain global investor exposure and enhanced commercial credibility through association with the LSE. This positions AIM as a catalyst for innovation, cross-border investment, and long-term economic growth. In the last five years, AIM has accounted for 53% of all capital raised across European growth exchanges.

Shares in AIM listed companies can qualify for 100% relief from inheritance tax (IHT) under Business Property Relief (BPR) if they are held for at least two years and the company meets the BPR criteria, for example, being a trading business rather than an investment vehicle. This provides UK-based investors with a unique opportunity to reduce the taxable value of their estate without needing to gift assets or establish trusts, while still retaining control over their investments. From April 2026, this relief will be reduced to 50%, but this still remains a unique and valuable incentive for many investors.

Since 2014, AIM shares have also been exempt from the 0.5% Stamp Duty Reserve Tax (SDRT) that applies to most UK share purchases. This exemption lowers transaction costs, particularly beneficial for high-volume or frequent traders, and enhances the appeal of AIM shares as a tool for portfolio diversification.

Criticisms and challenges

Despite these strengths, AIM faces persistent structural and market-driven challenges.

Many companies now choose to stay private for longer, supported by deep pools of venture capital. AIM has also struggled to deliver consistent returns, with performance lagging behind broader indices. Liquidity constraints and limited analyst coverage further compound the issue, making it difficult for investors to engage confidently with AIM-listed stocks.

The lighter regulatory framework, while designed for flexibility, has led to governance concerns, undermining market trust. In addition, whilst the regulatory framework remains 'lighter-touch' than a Main Market listing, costs have risen exponentially in recent years, meaning the potential benefits of listing have been undermined. With growing competition from other global growth platforms and evolving investor expectations, AIM risks falling behind unless it adapts to meet the demands of a more sophisticated and globally connected capital environment. So what can be done?

Future of AIM – continuing relevance

While AIM faces undeniable challenges, its future potential as a junior market remains promising, provided that certain changes are implemented in the short-term. We believe it is of national importance to have an efficient junior market as part of the government growth agenda.

AIM, demonstrated in its April 2025 Discussion Paper, is modernising its admission standards to enhance market credibility and competitiveness. Proposed reforms aim to improve liquidity, recalibrate tax incentives, and streamline the admission, compliance, and disclosure process, reducing duplication and cost. The reforms also propose permitting dual-class share structures, aligning AIM more closely with global growth markets, and seen as important to early-stage tech companies when founder control is seen as a benefit.

As companies increasingly stay private for longer, AIM can still position itself as a transitional platform, bridging the gap between venture capital and full public market exposure. AIM should continue to be the preferred route for firms seeking gradual entry into public markets, without the additional burdens and costs of the Main Market.

AIM works best for businesses with a strong product and clear growth strategy. AIM is well-placed to support sectors driving the future economy, including clean tech, AI, biotech, defence and sustainable energy, as seen with EARNZ PLC. With the right strategic focus, AIM should continue to be the go-to market for innovative, high-growth organisations.

AIM's future will not necessarily be defined by its past limitations, but by its capacity to adapt.

With reform, strategic repositioning, and a focus on innovation and values-driven growth, AIM can continue to serve as a dynamic market for entrepreneurial companies. As AIM evolves, the role of experienced advisers becomes even more critical.

With deep expertise and commercial insight in AIM, Hunters is well positioned to guide ambitious companies through every stage of their growth journey. Recognising the need for cost control and legal cost predictabilities, Hunters has designed a new corporate advisory product for AIM companies.

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