The Alternative Investment Market (AIM) is set to shrink by a fifth this year, as 61 companies representing £12.3bn of market capitalisation have announced plans to leave the junior market.
Some companies plan to move to London Stock Exchange’s (LSE) main market. Brooks Macdonald did this in March this year (2025).
Others are delisting or have been subject to mergers and acquisitions.
According to Aberdeen, if all these companies go ahead with their plans, the AIM market will shrink by 20%.
Research from both Peel Hunt and Aberdeen Investments illustrates “the shrinking universe of scalable opportunities on AIM”.
A report from New Financial that was sponsored by Aberdeen in October 2024 showed how investment by UK pension funds into UK small caps has collapsed in recent years.
It found that just one Local Government Pension Scheme has a specific allocation to UK smaller companies, compared with 18 back in 2013.
Companies listed on AIM made an economic contribution of nearly £70bn to the UK in 2023.
The AIM was launched in 1995 and has helped more than 3,988 companies raise over £130bn.
The AIM is a sub-market of the LSE that is designed to help smaller companies access capital from the public market.
Aberdeen added that UK smaller companies are currently trading at significant discounts to historic levels because of ongoing negative sentiment and outflows.
Aberdeen found that UK small caps are currently on a discount of -14.6% compared to their 10-year average.
In February 2025, UK small caps were the most undervalued stocks in the world, on a discount of -23.4% to their 10-year average.
Aberdeen co-manager of the UK smaller companies fund and the UK smaller companies growth trust Abby Glennie said: “AIM was once a thriving market, but it has been brutally knocked back by outflows in recent times.
“As a result, we’re seeing many of the biggest and best AIM companies moving to a main market listing. From a fund manager perspective, it’s not the end of the world for us as it’s still possible to invest in those companies.
“But when thinking about the health of London’s junior market, it is a very ominous sign. Eventually we will be left with a tiny, illiquid market.
“That’s fine for small, individual investors but will make it very hard to get large-scale institutional money into the growth companies of tomorrow. In that scenario, we need to be asking: how are we going to nurture the next generation of big UK companies?
“A 30th birthday is often a transitional moment, a time to re-evaluate, and it’s set to be no different for AIM. Our actions – or inaction – now will determine whether London’s junior market will still be around in another 30 years.”
Glennie added that Aberdeen supports the sentiment of the Mansion House Compact, which is trying to encourage more pensions money to go into UK smaller companies, but expanding the compact to include AIM-listed stocks will be “meaningless” if the AIM market continues to shrink.
In April, a freedom of Information request made to HMRC by TWM Solicitors revealed AIM is expected to raise at least an additional £110m in inheritance tax (IHT) per year.
This follows chancellor Rachel Reeves’ October 2024 Budget, where the inheritance tax relief on shares listed on the AIM was halved.
IHT chargeable on most AIM shares will now be set at a rate of 20%, half the potential 40% benefit that was previously available.
The changes take effect from April 2026.
Since the chancellor’s Budget, the FTSE AIM 100 Index has fallen by 18%, while the FTSE 100 has decreased by 6% over the same period.
In October 2024, the amount of initial public offerings (IPOs) on the AIM fell to its lowest level since the global financial crisis.
There were just eight IPOs that year, according to research by national accountancy group UHY Hacker Young.
This was a decrease from 12 the previous year and the lowest number since the five recorded in 2007/08.
Only £88.6m was raised through AIM IPOs in 2023/24, compared to £8.83bn raised during the market’s peak year of 2006/07.