The upcoming budget on 30 October is causing concern amongst investors and the distinctly scrooge-like demeanour of the Prime Minister also risks undermining a nascent economic recovery in the UK.
For our investors, of most import in the upcoming budget is any tinkering with Business Relief (BR) generally and, more specifically, its impact on AIM shares. Increasing skittishness of late has seen the AIM market decouple from its larger index peers. Rumours over what may or may not happen will likely become even more fervent but, above all, investors should not panic.
Our portfolio always chooses investments based solely on their strong risk/reward characteristics. Any kneejerk selling would, at first, be indiscriminate, but we would expect non-IHT investors to quickly target those companies that offer compelling value. We feel our portfolio over-indexes to this dynamic cohort of companies, avoiding those larger AIM stocks that are most ‘pregnant’ with AIM IHT money.
We take heart from the recent 10-year extension to the EIS/VCT regime and, in particular, note James Murray’s comments (Exchequer Secretary to the Treasury) that, “Startups and entrepreneurs are a driving force for greater investment, more jobs, and economic growth in the UK.” Those words apply at least equally to AIM listed companies, and we hope and expect the government to recognise the vital role BR plays in lowering the cost of capital for growth companies. The large-caps of today were once small-caps, and we need to do all we can to nurture tomorrow’s winners.
