The emergence of a dominant pan-European SME market promises “considerable benefits” for the growth of the European economy, said the study titled Assessment of the Economic Benefits and Opportunities for a Pan-European Growth Market.
Noting that such benefits are difficult to quantify, a Europe-wide platform which is competitive in cost terms, liquidity, and accessibility would help remove certain “important constraints” facing growth companies at critical stages in their development, and help redress the advantage held by the US in new technology.
Developments are likely to be shaped largely by the London Stock Exchange’s (LSE) Alternative Investment Market (AIM), with the market segment being “structurally well positioned” to take on the mantle of a European growth capital market. A key challenge, however, for AIM will be to further its European profile along the lines of LSE’s Dutch Trading Service in order to “enhance its local credentials” outside the UK, the study adds.
A growing role for the LSE as a truly pan-European platform was also cited as likely to “bring indirect benefits” by forcing other European exchanges to compete by reducing costs, streamlining regulation and targeting sectors and companies that previously may not have been contenders or candidates for stock exchange listing.
While AIM has the potential to treble the number of listings in the medium term, the study suggests certain European countries could see up to 5 per cent of medium-sized companies as candidates for listing. Germany is identified as having a significant number of third-generation Mittelstand companies which have reached a point where families are “ready to divest”.
Chris Gibson-Smith, LSE chairman, speaking at a UK Presidency and EU Commission Risk Capital Summit coinciding with the study’s release, stated: “Our shared goal is a powerful, competitive Europe that shapes the future of the world rather than retreats from its challenges. The LSE believes AIM’s destiny is to provide Europe with its growth market, building sound foundations for enterprise and growth across Europe, stimulating new economic activity and reducing the cost of capital in the European economy.”
RA
