‘Main market calling’ – AIM to shrink by a fifth as it approaches 30th anniversary

28.05.2025

• 61 companies, or c£12bn of market cap, are set to leave AIM – either to move to the main market, to delist or because they’ve been subject to M&A

  
  

• The moves calls into question to future of London’s junior market and comes as AIM prepares to mark its 30th anniversary this June

  
  

• Shrinking of AIM comes amid Mansion House aspiration of getting more money into UK small caps

London’s junior stock market is set to shrink by around a fifth this year, reflecting the deepening crisis for UK smaller companies.

Sixty-one companies representing £12.3bn of market cap have announced plans to leave AIM. Some are moving to London’s main market, some are delisting, and others have been subject to M&A. If all moves go ahead, the AIM market will shrink by 20%.

Aberdeen is supportive of the intentions of the Mansion House Accord, which includes AIM in its list of qualifying assets.

But the data, harnessing both Peel Hunt research and Aberdeen Investments’ own in-house analysis, illustrates the shrinking universe of scalable opportunities on AIM.

Barely a week goes by without a new announcement of an AIM move to the main market, with Serica a case in point in recent days, while Ashtead Technology has confirmed it will move to the main market by year-end. 

Abby Glennie, co-manager of the abrdn UK Smaller Companies Fund and the abrdn UK Smaller Companies Growth Trust plc, 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.”

Why save UK small caps?

A report by New Financial, sponsored by Aberdeen, last October highlighted 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.

This is despite all the socioeconomic benefits that smaller listed companies bring to the UK, with their combined revenues of £170bn and workforce of more than 1.1 million people in the UK and overseas.

Companies listed on AIM made an economic contribution of nearly £70bn to the UK in 2023.

Abby Glennie added:

“We support the sentiment of the Mansion House Compact in 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 shrinks to the point where it is uninvestable for institutions.

As companies move from the junior to the main market, AIM will decrease in market cap, liquidity, quality and breadth.

That’s why we strongly believe that the push to encourage pensions to invest more in UK smaller companies should not merely focus on AIM but on all UK-listed companies outside the FTSE 100.

That’s the only way we can revitalise our UK smaller companies market – which has been a powerhouse of UK domestic growth for so long.”

The UK small-cap valuation gap

UK smaller companies are currently trading at significant discounts to historic levels because of on-going negative sentiment and outflows. 

When looking at current 12-month forward price to earnings (P/E) ratios – a common measure of how cheap/expensive a market is, Aberdeen found that UK small caps are currently on a discount of -14.6% compared to their 10-year average.

Data up to 30 April 2025. Source: Bloomberg.

However, that discount has narrowed since Aberdeen last ran the data in February 2025. Back then, UK small caps were the most undervalued stocks in the world, on a discount of -23.4% to their 10-year average.

A discount to historic levels suggests that investors can pay less now than they have done previously to get access to the same earnings potential.

Aberdeen’s recommendations

In line with its response to the Government’s Pensions Investment Review call for evidence, at a group level Aberdeen believes there is a clear case for further consolidation of the Defined Contribution (DC) pensions market to invest in a wider range of asset classes that could support growth of the UK economy.

Aberdeen has recommended:

• Introducing financial incentives to encourage private investment to support UK growth – rather than mandating minimum allocations for pension funds

  
  

• For the Government to expand its areas of focus beyond venture capital and private equity to include smaller companies, private debt, real estate and infrastructure.

  
  
  
  
  
  

  

  
  

  These areas offer strong potential growth and are crucial to the long-term success of the UK economy