Anthony Hilton: LSE takeover risks London losing its AIM

The gap between how things started and what they have become is nowhere more evident than in the stock exchange. The point of an exchange was originally to raise funds for enterprise. People with ideas met potential investors with money. Share ownership was spread among several backers to minimise the risk to an individual. But today the London Stock Exchange is a sophisticated tech company providing a selection of electronic services to market participants while running a lucrative business that provides financial information.

Assuming that the planned merger with its German equivalent Deutsche Börse goes through, the Stock Exchange will become a major global player in the provision of services to the financial community. But it will mean that the Alternative Investment Market, which is the part of the organisation that still represents what economists say is the core purpose of an exchange, will barely figure as a footnote. In financial terms, it is irrelevant to the group.

But that does not mean it is not important. It is unfashionable, in these days of rampant neo-liberalism personified by the Brexit camp, to talk of the public interest, but the future of AIM should be a serious public policy issue. The future of this country rests on its ability to start, develop and grow world-beating, innovative companies. Venture capital has a big part to play in helping businesses get started. But when the time comes for them seriously to develop, they need something like AIM. It is the financial platform — or the financial escalator — where businesses can mobilise all the financial resources and secure the backing they need to grow to greatness. It is where growing companies meet the real world.

In fairness, the Government recognised this some time ago and, unusually, put its money where its mouth is. This Government in particular has invested prestige and treasure in seeking to make the market more attractive to investors by removing stamp duty from its transactions, and by putting AIM investments beyond the reach of estate duty, provided they have been held for a suitable qualifying period. These are significant concessions.

But the big question is whether it will all go to waste. It has been a bad 12 months for flotations and this dearth of companies coming to market and raising funds has led to a shrinkage in the number of Nomads — the nominated advisers who guide them on the way.

This matters because AIM is not only a platform for companies to buy and sell their shares but also a system supporting many different kinds of financial life from investors to lawyers, public relations consultants to accountants. But the eco-system is not healthy at present.

Two decades ago, AIM seemed to be at the centre of City life — everyone talked about it, and all the big organisations had made a commitment to support it. Now, it has a distinctly neglected air. Its 20th anniversary celebration last year was notable for the number of big-wigs who did not attend. Something needs to be done to re-energise it.

In this respect, the merger of the parent company has come at a bad time because it is hard to see it getting the senior management attention it needs, when those same senior managers are grappling with all the complexities of integration and making the combined business work. The London Stock Exchange has been a pretty good owner for the past 20 years but is it likely to be similarly committed for the next 20?

Someone needs to answer the question of how the organisation is going to fit in the combined group or, if it does not fit, what is going to happen to it because not many people know how to run a primary market. We badly need the authorities, the market participants or a trade body to set up a commission to define what AIM’s purpose is and how it might have to change to remain relevant to issues and investors in five years. Who are its customers, where will they come from and what services might they expect? What is expected of the different participants? What kind of market would they like to see and what can be done to create a unified vision for the business?

What happens to AIM matters not only to owners and participants but also to the country. If it is allowed to die of neglect, we shall all be the poorer.