Find out from our Co-founder Chris Boxall where the opportunities are in AIM and why this is a market you should be considering for growth and not just the Inheritance Tax planning benefits.

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Derek McLay

Fundamental Asset Management

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

Since the start of lockdown the unemployment rate in the UK remains relatively unchanged. So far so good. However, scratch the surface and a far more worrying picture begins to emerge. Figures from the Office for National Statistics showed that UK company payrolls fell by 649,000 between March and June, a 16.7% fall. The reason for this is obvious, people have remained employed through the furlough scheme but are not on their company’s payroll. Many experts believe we will not see the full effect this could have until the scheme ends in October.

However, The Office for Budget Responsibility has recently published a report warning that unemployment was likely to rise to a record 12% by the end of this year, falling back to 10% in 2021, and we have already seen several high-profile companies let staff go.

Oasis and Warehouse made 1,800 jobs redundant in April after being bought out of administration in April and later sold to Boohoo Group in May. Luxury fashion and accessories brand Mulberry cut 470 UK job cuts in June, a quarter of its global workforce.

So what has been the Government’s response to this looming crisis? Well they have committed to paying a job retention bonus of £1,000 for each furloughed member of staff brought back. This is courtesy of Rishi Sunak’s summer economic plan outlined last week. But will it be enough?

Two businesses who could be affected in very different ways are Dart Group a (Fundamental AIM portfolio holding) and Young & Co.

Dart Group, the owner of Jet2 airline, announced in April that it had placed 80% of its workforce on furlough and asked them to take a 30% pay cut during this time. However, reducing the cost associated with staff has done little to outweigh the impact of a mass cancellation of flights and travel restrictions and the firm has seen an 11 per cent decline in profits in the year to March 31. Virgin Atlantic, Easy Jet and British Airways have all confirmed they will be making significant redundancies and Jet2 is expected to follow suit. Considering the long term impact the pandemic will have on the travel industry it remains to be seen if the retention bonus will have much impact here.

Young & Co, which owns 220 pubs around the UK, announced in March that it would not be paying its final dividend and would furlough the majority of its staff. However, as pubs begin to reopen and early reports suggest patrons are all too willing to absorb any risks for a good pint, Sunak’s plan may be just enough to keep the bar staff pulling pints.

These measures will work for some businesses and not others and time will tell if they will be enough to keep Britain working.

Derek McLay
Fundamental Asset Management

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

There is no doubt that Covid-19 has changed the way we view our future. Investors and financial advisers alike are looking for the answers and the way to move forward. One thing we do know is that the show will go on regardless, Covid or non-Covid.

In the headlines this week, Boohoo Group reacted to criticism over work conditions at one of its suppliers and Rishi Sunak announced measures to kerb unemployment as business begin to reopen.

Join me and Fundamental co-founders Chris Boxall and Stephen Drabwell on the 28 July for our webinar: ‘Post-Covid opportunities in AIM you should be paying attention to.’ , where we will be discussing this and more. Find out why Boohoo group has never had a place in Fundamental portfolios and where we see the future for the UK economy and AIM. Click here or on the image below to register.

Last week, Chris and Stephen presented at Intelligent Partnership’s AIM Showcase webinar event where we discussed our response to Covid-19, our AIM portfolio for IHT solution and our views on why you should invest in AIM for growth and not just for potential tax savings. You can watch the videos from the link here.

Lastly, it is sunny around the UK today and due to be this weekend also. Enjoy the reopening of pubs and beer gardens, take care and be safe.

Derek Mclay

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

An excellent report from specialist growth company research house, Equity Development, has highlighted the huge benefits AIM brings to the UK economy and how the mild encouragement provided by the Inheritance Tax concession to those considering an IPO onto AIM is a very large multiple of the cost in tax foregone by HMRC. We would urge you to read the report from the link here.

Equity Development considers AIM companies contribute over £33bn Gross Value Added (GVA) directly – over 40% more per employee than the national average – and just as much indirectly to the UK economy since their direct GVA has increased by 35% in the last five years, more than twice as fast as the average. Not only are AIM companies more productive than average, their productivity is growing – at 11% pa, significantly faster than average.

A report by Grant Thornton on AIM’s first 25 years shows that small companies listed on AIM perform ‘better’ – generating more added value, more employment and far greater tax receipts for HMRC – than comparable “private” companies. Grant Thornton found that:

• In their first year on AIM companies on average grew profits by 36%, and by 24% per annum for the next four years.

• Revenues grew 40% p.a. for three years, then 20% p.a. for the next two. Over the last five years AIM companies have outgrown, by a significant amount, the “private” companies in their sectors in nearly every case

AIM’s superior growth has, in just the last five years, added £4.7bn pa to UK economy and more than £1bn per annum to HMRC. But you may ask, at what cost?

The IHT concession is not a precise sum that can be easily calculated, but Equity Development reckons it ‘costs’ the Treasury c. £50m pa.

Like us, Equity Development questions why HMRC would abolish Business Relief (on which the IHT reliefs are based) to gain roughly £50m at a probable future cost to themselves exceeding £1bn per annum. They also suspect that much of the publicity given to suggestions that Business Relief should be abolished comes from promoters of more expensive, less useful IHT-avoidance schemes who are losing customers to simple AIM IHT ISAs. We have experienced on numerous occasions at first hand the added complexity and cost, including outrageous legal fees, imposed on relatively small estates with trust structures in place and would urge investors to think carefully before going down this route.

Not only is AIM of huge benefit to the UK economy but AIM listed companies represent the primary source of growth for UK small cap investors, reflected in the significant outperformance of AIM for IHT managers, including Fundamental, over the past decade or more.

You can find out more about Fundamental Asset Management’s high performing AIM portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.