AIM Report 2019

24 25 CONSIDERATIONS FOR INVESTMENT SMEs AND THE ECONOMY FRAGILE CONFIDENCE BUT STRONG OPPORTUNITIES AIM offers a significant opportunity to access the tax efficient investment market, while at the same time supporting young and upcoming British businesses. It provides these small companies with a regulatory environment that can appeal to investors when compared with unlisted companies, providing a certain amount of clarity and transparency about their businesses and the investment opportunities that they offer. Small and medium-sized enterprises (SMEs) continue to be critical to the UK economy. Figures published by the Department for Business, Energy & Industrial Strategy (BEIS) in October 2018 state there were 5,667,510 private sector businesses at the start of 2018. SMEs (0-249 employees) made up 5,660,000 of those businesses, accounting for 99.9% of the total. The combined annual turnover of SMEs was £2 trillion, 52% of all private sector turnover. 24 The number of private sector businesses fell by 0.5% compared to 2017 (a drop of 27,000 businesses), which was the first fall since the index was started in 2000. However, to put this into context, there were still 2.2 million more businesses than in 2000. Government policy is targeted to help small businesses grow and thrive, with a clear recognition of their importance to the UK economy. In October 2018 the Federation of Small Businesses (FSB) praised the Chancellor for delivering a “small business-friendly Budget”. FSB national chairman Mike Cherry said: “Through the Budget, the Chancellor is now using the strength of the Treasury to back small business.” And in the 2019 Spring Statement, then-Chancellor Philip Hammond described the government’s approach as an economic plan “to back the enterprise and ambition of British business”. Given this recognition, the government also provides a number of incentives to encourage investment into these smaller companies to help them scale up and flourish. Acknowledging the riskier nature of such investments, there are tax incentives that work to encourage people to use their money in a tax efficient way, while at the same time backing British business growth. In June 2019, then-Prime Minister Theresa May opened London Tech Week by stating that the UK is “one of the best places in the world to start and grow a tech business”. Government changes to the tax regime around the Enterprise Investment Scheme and Venture Capital Trusts have encouraged greater investment in so-called knowledge intensive companies, which may often include technology firms. CONTRIBUTION OF DIFFERENT SIZED BUSINESSES TO TOTAL POPULATION, EMPLOYMENT AND TURNOVER SOURCE: DEPARTMENT FOR BUSINESS, ENERGY & INDUSTRIAL STRATEGY “Small businesses are the backbone of our economy” — Small Business Minister Kelly Tolhurst, launching new investment for small businesses in Jan 2019 36% 0.6% 13% 15% 0.1% 40% 48% 48% Small Medium Large 99.3% BUSINESS EMPLOYMENT TURNOVER