The number of companies delisting from London’s junior stock market has risen sharply in the last year, adding to concerns about the future of the City’s financial sector.
In the past 12 months the number of companies on the Alternative Investment Market (Aim) has fallen by 70 to 738 at the end of March, according to London Stock Exchange Group data. That is a drop of 9%, and is significantly more than the drop of 25 companies the year before.
The London Stock Exchange Group runs Aim, which gives smaller companies the option to raise funds on the stock market without having to comply with the more stringent reporting requirements for listing on the main market.
However, the market’s status as a place for companies to grow rapidly has come under scrutiny in recent years, with the number of companies falling from almost 1,700 in 2007.
Two small biotech companies, Redx and C4X Discovery, said this month they would delist because they believe they can raise more money as private companies. Scirocco Energy, a green energy investor, said it would leave the market because of high costs to comply with listing requirements.
Other companies have exited because of takeovers, such as the retailer Hotel Chocolat and the asset manager Gresham House.
The increase in delisting comes at a time when a number of big companies have said they are considering moving from the London Stock Exchange (LSE). Wael Sawan, the chief executive of Shell, caused alarm among investors this month by saying that the oil company was undervalued compared with peers in the US.
The grocery delivery company Ocado is also under pressure from unnamed investors to shift its listing from London to New York, the Sunday Telegraph reported.
The focus on the LSE’s fortunes comes in the wake of a series of lost business. The chip designer Arm – one of the few world-leading tech companies to have grown in the UK – floated shares on New York’s Nasdaq exchange in September last year despite intense lobbying by the UK government.
The building materials company CRH last year shifted its main stock market listing to the US, following in the footsteps of the plumbing and heating supplier Ferguson. The Anglo-German tourism company Tui is also considering shifting its main listing away from London, this time in favour of Frankfurt.
Departures from the stock market are expected as companies fail or are bought up. However, an increase in delistings could cause problems if they are not replaced, and only one company has joined Aim in 2024, after 10 joined in 2023. A shrinking market would be less attractive to potential investors in companies.
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Marcus Stuttard, the head of Aim and UK primary markets at the London Stock Exchange Group, said: “Aim continues to be a pre-eminent global growth market and the most active in Europe. That position is not taken for granted and the comprehensive reform agenda currently under way will build on the existing strengths of the UK’s capital markets including Aim.”
Colin Wright, the chair of UHY Hacker Young, argued that some companies may have been put off keeping an Aim listing because of new reporting requirements, including on environmental, social and governance issues. Extra costs can be difficult for the smallest growth companies hoping to list.
“An Aim listing is meant to be relatively low cost and light touch in terms of regulation,” he said. “The challenge Aim now faces is to strike the balance between continuing to enforce high regulatory standards and creating a compliance culture that is flexible enough that it motivates businesses to remain listed.”
