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Fuelling growth through incentivising investment

Small and mid-size quoted companies needing fuel to grow; two initiatives have arrived in short order

MARKETS ARE BUILT ON CONFIDENCE. Once confidence starts to grow, positive momentum takes hold.

I talk a lot about the engines of growth – our small and mid-size quoted companies – needing fuel. It’s seemed over the last few years that everyone agrees with this concept but government has done very little about it.

And then rather like London buses two initiatives arrive in short order. In the Autumn Statement the chancellor announced that AIM and ISDX shares (also known as growth market shares) will be included in ISAs following consultation. The consultation on how to implement this change came out in March just before the Budget.

This has been followed in the Budget by the announcement that the 0.5% stamp duty tax will be removed on the trading of shares on growth markets from April 2014. Together with the London Stock Exchange and other industry bodies, we have been campaigning for the removal of stamp duty on trades in AIM and ISDX shares. This measure will help to increase liquidity and investment in small and mid-size quoted companies – vital engines of growth for the UK economy.

Our quarterly QCA/BDO Small and Mid-Cap Sentiment Index in November 2012 showed that including AIM and ISDX shares in ISAs and removing stamp duty on trading in small and mid-size quoted company shares were two of the five most popular fiscal measures that would have the greatest positive impact on companies were it announced in the 2013 Budget.

It is important to note that the stamp duty change is not due to take effect until the next tax year – in April 2014. Between then and now, there will be a consultation from HM Treasury on the move. Our understanding is that the consultation will not be about whether to remove stamp duty on AIM and ISDX shares, but instead how to implement it. For example, there may need to be some changes to the CREST settlement system.

All of a sudden the fuel gauges have started to flicker. Both measures will take time to come up to speed, but they are nevertheless very welcome. They will create momentum in trading. With increasing trading volumes, we should start to see an overall improvement in the valuations of growing companies. This will enable these companies to approach their investors and raise finance with more confidence. With more finance we should see more jobs and the creation of long-term value for shareholders.

Confidence creates more confidence; it’s contagious. So – in the nicest possible way – perhaps we should be a Contagion Nation as well as an Aspiration Nation.

Tim Ward is chief executive of the Quoted Companies Alliance

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