Aiming to help alternative market

Matt Stroh, from Grant Thornton's Leeds office, said investor confidence had been hit by a series of changes since 2002.

He was speaking as a report from the business advisory firm, commissioned by the London Stock Exchange, said Aim-listed firms contributed 12bn and 250,000 jobs to the economy directly and another 9bn and 320,000 jobs indirectly through supply chain and multiplier effects.

Yorkshire's Aim-listed firms include Bradford acne specialist Syntopix Group, clean-fuel firm ITM Power and gas-cylinder group Pressure Technologies, both of which are based in Sheffield.

Mr Stroh called for more fiscal incentives and fewer restrictions to boost the small cap market.

"If Aim is to continue as the world's leading platform for growth companies looking to raise capital, we need to lift unnecessary restrictions on the investment criteria by venture capital trusts and reverse the gradual erosion of fiscal incentives.

"Aim has a great track record, but investment trends since 2002 show consistent net outflows from the UK small cap sector.

"Over the years, changes to incentives for investors in AIM securities have diminished their effectiveness and reduced investor confidence, for example, by abolishing business asset taper relief and introducing ever tighter restrictions on the investment criteria for venture capital (VC) trusts."

The report calls for five initiatives to help firms raise capital on Aim:

To allow VC firms to take part in the secondary market.

To increase the gross asset test for VC trusts to 15m and 250 employees.

To secure a favourable capital gains tax regime for investing in small and medium-sized enterprises.

To commit to existing incentives for at least five years.

To consider whether Aim-securities should be eligible for inclusion in ISAs.

Marcus Stuttard, head of Aim, said: "Aim is already a hub of entrepreneurial activity, but it is vital that the market can draw on the most supportive business environment possible if it is to achieve its full potential in helping power economic recovery.

"The findings and proposals in this report support the recommendations the LSE has put forward in its response to the Government's consultation on financing a private sector recovery.

"We ask the Government to recognise the importance of a package of measures needed to attract investors to SMEs and allow companies to raise capital at an acceptable cost."