UK: Insight Magazine - Featuring ´The future of digital radio by Simon Cole UBC Media Group´

Last Updated: 9 September 2005


As a board member of the 2012 Olympic committee, I was delighted to be in Singapore for the announcement of the London win. This is not just fantastic news for London but also for the whole country. Not only will the Olympics bring much needed regeneration to the most deprived parts of London and reinforce London’s position as a world class city, but they will also undoubtedly provide supply opportunities to growing businesses from all parts of the UK.

However our excitement was greatly dampened by the dreadful terrorist attacks in London. I’d like to extend my deep condolences to the families and friends of those involved. The uncertainty since the attacks, as well as slowing consumer demand (highlighted by Roger Bootle) indicates that life is going to be tough for growing businesses over the next year. To survive the economic downturn, businesses will need to be prepared and flexible.

In this edition, we feature case studies of two businesses which are at very different stages of growth, but which are both well positioned to succeed: Simon Cole, CEO of UBC Media Group plc explains how they are maximising the opportunities offered by the rapidly changing digital radio market. And Simon Bicket, FD of Cheapflights discusses how their unique business model has turned a great name into the rare phenomenon of a profitable and rapidly growing dotcom. In another article we cover a key area that all growing businesses need to address – sound and robust tax planning. Chris Maton’s article on page eight explores the changes that are occurring in the tax environment and offers advice about how to avoid potential pitfalls.

Finally, I’d like to congratulate AIM on their tenth anniversary. As the market to which many growing companies look to raise additional capital for expansion, it’s encouraging that the market is celebrating its anniversary in such healthy conditions.

I’d welcome your feedback and ideas for future editions. I hope that our articles offer inspiration and guidance to our readers from companies of all sizes.

Mary Reilly, Partner


Economic Outlook - Tough Times Ahead For Third–Term Labour

By Roger Bootle, Economic Adviser to Deloitte

Labour’s third term is going to be a very different kettle of fish from the first two. The first term was characterised by radical reform and tough policy – the institution of the MPC and the continuation of tough spending policy and the introduction of new fiscal rules. The second term was really about spending the capital accumulated in the first. And there was a general air of prosperity. Unemployment continued to fall and house prices soared. The result was that consumers spent freely in the shops.

In the years ahead, though, things are going to be very different. There is no scope for further large increases in government spending financed by borrowing. Indeed, the rate of growth of government spending is set to fall from 7% this year to 4.4% in 2008/9. Meanwhile, the tax–take is supposedly going to rise, helping borrowing to fall. We are set for a fiscal tightening.

Moreover, the outlook for consumer spending does not look too good. Consumers have suffered a squeeze on their real incomes but more important, I believe, has been the slowing housing market. I am forecasting that the growth of consumer spending will slow to only 1.5% both this year and next.

As a result, I am forecasting weaker GDP growth, but not a recession. To my mind, the MPC holds the key. As the evidence of the consumer slowdown gathers pace, I believe that it will switch to cutting interest rates. I am forecasting rates at 3.5% next year – and I think that they could possibly fall even lower.


Share issues

The ECJ has recently ruled that the issuing of shares is not a supply for VAT purposes and the VAT incurred on associated costs is recoverable as an overhead of the business. The decision contradicts Customs' current policy that VAT on costs relating to shares issued to EU entities cannot be recovered and a significant opportunity exists to submit claims for VAT incurred on such costs where it has previously been restricted. Our view is that this may also apply to the issuing of bonds and similar instruments and listings on stock exchanges.

Paying VAT liability by direct debit

Businesses that have signed up for eVAT returns can now arrange to pay their VAT by Direct Debit (rather than by BACS, CHAPS or Bank Giro Credit) and should benefit from an extra 3 days cashflow as they will get the extra 7 days to file their electronic return as usual and it will then be a further 3 working days before payment is actually collected. However, some businesses (e.g. those making annual returns or payments on account) will not be able to take advantage of this new facility.


Following an outstanding night at the annual Sony Radio Academy Awards, where his production company Unique lifted two gold awards, UBC Media’s CEO, Simon Cole is more than a little positive about the future. ‘Radio,’ he says, ‘is on the brink of its most exciting five years since Marconi.’ He told Insight’s Jon Dewey why.

Considering the tectonic shifts taking place in the radio industry, Simon Cole’s optimism looks to be well founded. He describes UBC Media (UBC) as a digital radio company and ‘digital radio,’ he says, ‘is coming of age.’ The shift to what he calls ‘the digital economy’ will drive fundamental and far-reaching change – to broadcasting, advertising, production, even the devices on which we listen to radio.

In fact the proliferation of radio stations, digital and analogue, is already driving significant change in the industry. For example, there are significantly more channels today than there were 5 years ago, but there aren’t many more listeners, and therefore no increased advertising potential so broadcasters must find a way to run their stations more efficiently.

Brave new world

Naturally, top of the list for areas where savings can be made are non-core services, such as traffic and travel news, and Cole’s UBC provide a perfect alternative. UBC has developed a service, in partnership with TrafficLink, a national aggregator of traffic and travel data, to provide traffic and travel content to radio stations all over the country, delivering significant savings to each one. EMAP takes UBC’s service, along with GCap, The Wireless Group, Chrysalis Radio, Guardian Media Group and UKRD. However, instead of charging for the service, UBC takes an advertising spot in each traffic and travel bulletin, and in doing so it has created something completely new and very valuable – a national advertising network.

In fact, UBC is now the largest supplier of network services to commercial radio, serving around 200 stations nationally. Alongside its traffic and travel service it also delivers an entertainment news service and is working on others. What that means in practice is that UBC’s Network Drive service, as it is called, has a current weekly impact –number of ‘listens’ – of over 139 million, and a reach – the number of individuals who hear an advertising spot – of 15.1 million. Unsurprisingly, given those figures, UBC is currently billing around £1 million per month for advertising on its Network Drive service.

Teenage kicks

UBC’s origins lie in Cole’s passion for radio as a teenager. He first became involved in radio at BBC Radio Blackburn when he was 14, and then worked and financed his way through a drama degree at Manchester University by freelancing as a radio presenter. Following a brief taste of the big time, when he covered for Radio 1’s Mike Read, Cole realised that he wasn’t ‘the world’s greatest presenter’ and that he could make a bigger impact in production. He joined Manchester’s Piccadilly Radio and became programme controller – ‘the only job I had ever wanted in the world’.

A trip to the US opened his eyes to the potential for radio stations to sell programmes to others and, after discussing it with his bosses at Piccadilly, he was tasked with setting up a company explicitly to produce content to sell to commercial radio stations. PPM, the UK’s first production company in commercial radio, was a great success but when Piccadilly suffered a hostile take over in 1989, Cole resigned.

‘After Piccadilly people just assumed that I would be setting up a company to do the same sort of thing again,’ he says. Events gained their own momentum and as he laid out plans for the business with friend and colleague Tim Blackmore – who Cole describes as a ‘god in the industry’ having been a founder of both Radio 1 and Capital – he received backing from Capital Radio and from another radio name, Noel Edmonds. The result was Unique the Production Company, now part of UBC Media – a company with a market capitalisation of £42.66million, and which has just reported a turnover of £15.96 million and operating profits which have more than doubled in the last year to £1,075,000 (2004: £405,000).

It’s a far cry from one of Cole’s first jobs at Piccadilly, which was, ironically, going up in the station’s helicopter to do the traffic report. Cole suggests that he has been very lucky, particularly in the partnership he has established with Tim Blackmore. ‘Success,’ he says, ‘is about knowing your weaknesses and surrounding yourself with people who can compensate for them – and around me I have an excellent team.’

That team now includes a new non-executive chairman, John Hodson, formerly CEO of financial services group Singer & Friedlander plc, who will be well placed to guide the company through what Cole predicts will be a bloody few years for the industry.

Award winners

UBC’s production credits are impressive. It produces around 1,000 hours of programming for the BBC each year including Something Understood on Radio 4, and The Alternative Sixties Show with Mark Lamarr on Radio 2. Among its other credits are two of this year’s Sony Gold Award winners – Vote Friction and Missing the Message, both for Radio 1. These are, says Cole, his company’s Cistene Chapel moments – quality programmes that will make little money but will build the brand’s reputation in a way that will reap dividends further down the line.

UBC also operates two major radio brands, Classic Gold Digital which broadcasts Classic Hits on a range of digital and AM analogue platforms in the UK and FM frequencies overseas, and Oneword radio, a nationally acclaimed commercial station broadcasting on terrestrial digital, Sky and Freeview.

UBC recently divested 51% of its interest in Oneword to Channel 4 in a move that is further evidence of Cole’s view of the convergence of digital media. ‘The rationale behind the sale is simple,’ says Cole. ‘Forty nine per cent of what Oneword will become with Channel 4 is worth more than 100% of what is was with us.’

‘In this multi-channel digital environment we believe that the strongest way to cut through is to have cross-media brands,’ he continues. ‘Now that doesn’t mean Channel 4 radio, but it does mean Channel 4 being able to say in the Richard and Judy Show Book Club that the book featured is on our digital radio station Oneword at eight o’clock tonight – which is exactly what the BBC has done very successfully between its television and radio channels.’

Leading the way

Digital take up is accelerating rapidly and the industry predicts that by 2008 around 28% of the UK population will have a digital radio. But as Cole points out, such predictions miss the point. They don’t include people who listen to digital radio now, on Sky, Freeview or the internet. In fact, around 19 million people are already listening to digital radio in the UK even though only 1.5 million digital radios have been sold here.

‘The UK is the world leader in digital broadcast technology,’ explains Cole. ‘We’re the world leaders in digital TV and we’ll soon be the world leaders in digital radio.’ And that presents UBC with a challenge – resisting the temptation to expand overseas. Cole estimates that the US is about three years behind the UK in digital radio but the potential is obvious. Already in great demand in Europe and the US as a speaker at industry conferences, he argues that the right strategy for UBC is to exploit its know-how through licencing rather than expansion.

‘We’re getting strong interest from US companies who want to work with us in developing US digital radio. But, as a small UK company, we have to decide how much of that opportunity we go after, because the one thing we mustn’t do is sacrifice our ability to develop business here. We don’t see any justification for investing our shareholders’ money if we can make money more immediately through licencing our expertise. And, it would overbalance this company if tomorrow I decided to open a New York office with 20 people. It comes down to management bandwidth.’

New technology, new world

People’s listening and viewing habits are changing rapidly and, according to Cole, radio needs to get out of its ‘silo’ mentality and respond in radical ways. Advances in technology are creating consumer demand, and vice versa, says Cole, and together they are driving economic change. ‘For example,’ he explains, ‘this interview is being recorded on an iPod. It would only take a digital radio card in that device and you could buy music off the radio using some kind of pay-as-you-go card – that’s a model that we are working on and that I believe will be part of the radio industry in the future.’

Such potential interactivity highlights another feature of the digital economy – the evolution of subscription-based models as well as advertising models. In the US subscription radio is already big business with over 4m people paying around $11.99 per month to receive digital radio into their cars. ‘It’s a different technical model,’ says Cole, ‘but the economic impact has already been dramatic and I think subscription will play a part over here, whether that’s subscribing to channels or to access interactivity such as downloading music or viewing video clips of the songs you are listening to.’

In fact, BT has already launched a service called Livetime, which delivers 3 channels of TV over digital radio and, says Cole, you only have to look at TV to see how the arrival of digital technology has transformed both the medium and the services available.

Another growth channel

All of which feeds directly into UBC’s other major growth business, software.

‘It’s a very large part of our future,’ says Cole. ‘Digital radio is essentially a wireless broadband connection and that requires software at each end of the link. And, if you are going to start sending people video or allowing them to download music, then you’ll need software to allow the broadcaster to send the content and to allow the consumer to receive it.’

One area in particular where UBC is setting the pace for the whole industry is EPG – Electronic Programme Guide. ‘If you’ve ever seen a digital radio,’ says Cole, ‘you’ll know that they don’t have tuning dials – instead they have a screen that shows a list of stations. But in a multi-channel environment you will need to be able to organise them, in the same way that Sky does its channels, into music, speech radio, news etc.’

After four years of development work, UBC is the only company in the world with a commercially available digital radio EPG, based on its pioneering ManDLS software, which is used to manage the scrolling text that already forms part of every digital radio service. ‘The first radios capable of an EPG have already begun to appear,’ adds Cole. ‘This year we will start to see the release of radios with colour screens and digital radios integrated into phones with EPGs – and of course, lots more people will start producing EPGs.’

In at the start

Cole admits that he and the company have been on a constant learning curve, working out where the economic benefit is going to come out of the software chain. Although there are no revenue opportunities at the device end, Cole says, ‘It has been worth investing in working with manufacturers to create the global standard for EPG, because it makes it much easier to develop software on the broadcast end that makes the best use of those receivers, where you can be proprietary and where you can licence.’ Cole confidently predicts that 2005 will be a big year for UBC in terms of licencing EPG software, and he says EPG will drive further change. ‘In the digital world the frequencies that stations broadcast on will become irrelevant and instead the name, and what it says about the station, will be all important. ‘So,’ he argues, ‘you won’t see names featuring station frequencies anymore because that name doesn’t say anything. Instead you’ll see "24-hour Chart Hits Radio" or "Classic Hits from the 60s" – because, as you do when you see the Disney channel on Sky on TV, you’ll know exactly what you are going to get if you select that channel.’

There’s no doubt that the radio industry is set for a massive shake up as the digital revolution takes hold. And it’s equally clear that, with a passion for radio and a willingness to see and respond to the potential of new technology, Cole and UBC will be surfing ahead of the wave.


To the outside observer there would appear to have been a bit of a falling out in the tax playground. Chris Maton discusses the trends in the tax environment and likely implications for the future.

H M Revenue & Customs might well accuse the taxpayers of starting this because they just wouldn’t play the game that the Revenue wanted them to. The taxpayers on the other hand may point the finger at the Revenue who, they say, have been making up the rules as they go along. As we all know, its no fun playing a game when the other side keeps changing the rules so that they always win.

In the good old days there were two types of tax strategy that could be followed:

  1. Tax planning – where a taxpayer organised their affairs in accordance with the legislation, but in a fashion that minimised the taxes paid.
  2. Tax evasion – where tax affairs were organised in such a way that broke the law and rightly should have lead to a spell in prison!

More recently the government and H M Revenue & Customs have invented a third category: Tax avoidance, where a taxpayer arranges their tax affairs in a way that falls within the strict application of the law, but in such a way that perhaps benefits from reliefs and exemptions that it is questionable Parliament ever intended should be available to them.

Clearly the tax profession would have nothing to do with tax evasion, or those that pursue it, but have been more than happy to accommodate a mixture of planning and avoidance. However, there are two points to note:

  • The only difference between planning and avoidance would appear to be "Parliaments intention" and of course Parliament’s intention can sometimes be difficult to discern. There can be no clear demarcation line between the two strategies.
  • Success or failure of an avoidance strategy depends on the taxpayer being correct in his or his adviser’s interpretation of the law and its strict application.

On the second point the boundaries have been moving considerably over recent years as the Courts have moved to a more "purposive" (as opposed to "literal") approach to statutory construction in avoidance cases. Put more simply, in some (but not all) cases tax avoidance, where it is clearly contrary to Parliament’s intention, may not work after all.

Some might think that this move towards a purposive approach by the Courts would be enough. Evasion is illegal, avoidance doesn’t work where it contradicts the plain intention of the legislation, and planning is after all what you should be allowed to do in any event. However this new purposive approach has its limitations and is itself fraught with difficulty.

So the game isn’t entirely up for the would be tax avoider and his advisers, and that is why the game has perhaps turned ugly. The Inland Revenue have invited the following "big kids" in the playground to play on their side:

  • The new disclosure rules – where a taxpayer, or more usually his advisers develop a new idea that has as one of its main benefits the avoidance of tax, details of the scheme (sufficient effectively to enable the Revenue to change the law if they choose to) must be provided to the Revenue on a very tight timescale (as little as five days). The danger here isn’t the fact that you have to own up to the planning (that would be the case anyway), but the fact that H M Revenue & Customs then have the chance to change the law much more rapidly than before.
  • The use of publicity – it is clear that the Revenue are not afraid to "name and shame" tax avoiders. Whilst the tax profession may easily be able to distinguish between avoidance and evasion, as far as the man on the street is concerned if you are not paying "the right amount of tax" you may be lumped together with a whole range of unsavoury characters. The Revenue’s PR machine must not be under-estimated particularly by those responsible for the financial affairs of high profile individuals and companies.
  • Vigorous litigation – there are all sorts of reasons why tax avoidance schemes may not work and H M Revenue & Customs are very committed to finding those reasons and exposing them in the Courts. H M Revenue & Customs now have a number of cases in their armoury which develop this theme of the "purposive approach" (not least of which being Arrowtown, Scottish Provident and Halifax). The last of these, a VAT case, introduces an EU concept of "abuse of rights" which H M Revenue & Customs are known to be looking at seeking to apply to direct tax situations.

The grown up approach

So what is the grown up approach? Firstly, to be aware that the rules have changed and there are consequences that follow from your choice of a tax strategy, over and above simple success of failure. Ignore these consequences at your peril.

Secondly recognise that a robust tax strategy will be based around achieving genuine commercial objectives in a tax efficient way.

Thirdly get used to applying the "smell test" to planning ideas that are brought to you and use your nose. The Revenue will.


Important changes to the grant regime are due after 2006, Alistair Davies explains why now could be your last chance.

Private sector companies in the United Kingdom have benefited from significant grant aid over the years to help support their investment and employment plans. Grants can be available to support investment in areas such as: capital expenditure, employment, research and development and business improvement.

Enlargement of the European Union means that after 2006 a significant proportion of aid currently available to the UK under the Selective Finance for Investment (SFI) scheme will be redirected to new EU entrant countries. An opportunity exists for companies to secure grant support now, before these changes come into effect.

Do your medium-term investment plans involve an investment in an assisted area location?

This aid is geared towards projects located in an "Assisted Area" (see map opposite) and involving:

  • the creation or safeguarding employment together with
  • capital expenditure or property lease commitments.

The SFI Grant may help to support business expansion, or it may help to retain existing activities. If a company faces choices in terms either of where to locate a project or in terms of the ranking of investment projects, grant aid may be available to help clinch the project in an Assisted Area.

A wide range of UK locations, including many major cities, can qualify for assistance, with a higher level potentially available in Tier 1 areas such as South Yorkshire, Merseyside, parts of Wales and Cornwall. However, grant is also available in areas of the South East such as Luton, parts of London and Brighton. To confirm the eligibility of a specific postcode a check can be made at

These grant changes will also affect Western Europe, so now may be a good opportunity for companies to think about their medium-term investment plans in that region.

What type of companies secure grants and how much money might be available?

The scheme is able to assist anything from small and medium-sized companies through to major multinationals. It is the principal grant scheme used by the UK Government to encourage private sector companies to invest. The grant level will vary by location but could help to support between 10% and 35% of eligible project costs.

The popular misconception that assistance is only available to manufacting companies couldn’t be further from the truth. In fact grant eligible projects may include:

  • Establishing a Shared Service Centre.
  • Relocation/expansion of back office functions.
  • Expansion of customer support activities eg contact centre/IT Helpdesk.
  • Retention/expansion of Research and Development function.

Grant is not only available to companies that are loss making or are struggling to secure finance. Some recent project awards include:



Employment implications


engineering company

safeguarded 15 jobs


shared services centre project

created 50 new jobs


financial services company

created 300 new jobs


financial services company

safeguarded 360 jobs

What type of projects are eligible?

All applications are assessed around criteria including: project location, expenditure, employment, viability, quality, productivity, skills and need for grant.

Projects typically involve three-year capital expenditure plans in excess of £500,000, or those that involve the creation or the safeguarding of jobs, and broadly fall into two categories:

  • New projects and expansions which create employment; and
  • Projects e.g. for modernisation or rationalisation, which do not provide extra jobs but maintain/safeguard existing employment.

The investment or employment implications of a project will typically be considered over a three-year timeframe.

What type of projects don’t qualify?

  • Sectors subject to EU restrictions such as iron and steel, coal, synthetic fibres, vehicles, and agriculture and fisheries, or sectors that are already fully served, as this will lead to overcapacity, damaging productivity.
  • Projects which simply transfer jobs from one part of the country to another with no significant increase in employment or growth of output.
  • Projects involving local services, for example retail outlets or restaurants.

This is the biggest change that has occurred to the UK grant regime for more than ten years and the opportunities to secure grant are likely to be very different after 2006. This may be the last chance to secure grant aid in many locations.

TRADING ON CLICKS, an online travel-deal aggregator, is doing what few other companies can do –making a profit trading on the internet. At the heart of its success are a unique ‘pay-per-click’ model and a willingness to process and package huge quantities of data on behalf of its users.

As many entrepreneurs have discovered to their cost, turning a good idea into a great business is quite a trick. And when it comes to making money on the internet, that rule applies doubly.

Which is why Cheapflights – profitable, not in-debt and with over four million users per month in the UK and US – is something of a phenomenon. But then Cheapflights does have a few things in its favour. The name is one. When a former Harpers & Queen travel editor, John Hatt, spotted the potential for advertising travel company’s discounted holidays and flights on the still embryonic internet, his decision to register the names and was inspired. Today the phrase ‘cheap flights’ is one of the most frequently used search terms on Google.

The second is Cheapflights’ unique business model. While many companies sell flights, holidays and other travel products online, Cheapflights remains the only major aggregator of travel deals in the UK. Cheapflights is in fact an internet publisher and its business is in internet traffic – the company doesn’t actually sell any products, travel or otherwise, at all.

Simon Bicket, Cheapflights’ Finance Director explains: ‘Cheapflights is a place where you can come and compare deals on holidays and travel. But, unlike other online companies, such as Opodo, Lastminute or e-bookers, we don’t have any fulfilment – we’re not an agent, we don’t sell tickets.’ Instead visitors to Cheapflights’ websites can view offers from over 900 of what Simon calls ‘travel advertising partners’, ranging from the very largest to the very smallest.


What happened in 2000 transformed the company and enabled Cheapflights to radically improve its service to its two "customer" bases – the site’s users and advertising partners. When Cheapflights’ founder, sold the business in early 2000 to a small group of investors led by CEO David Soskin and Vice Chairman, Hugo Burge, the three man team radically changed the remuneration model of the company. Income had been restricted by the old media advertising model of pay per page, which accrued no benefit from growing site traffic. The new management’s innovative answer was to monetise growing traffic by introducing "pay-per-click", the first dotcom in the UK to do so. This model allows advertising partners of all sizes free access to the appropriate Cheapflights site. However, if a user finds and clicks onto a deal, taking them to the advertiser’s site, then Cheapflights charges a fee between 17 and 35 pence depending on the nature of the deal and the rate the advertiser has negotiated.

Whilst Cheapflights was always a profitable business, this innovation dramatically improved profitability, allowing the company to invest in technology and people from cash flow, and grow without the need to borrow. Under the current management team, Cheapflights has grown to be a well-resourced, slick operation of over 60 people – all shareholders in the business – growing advertising revenues in excess of £10 million in 2005 and predictions of driving £1 billion worth of travel business to their advertising partners this year.

Cheapflights operates what Bicket describes as a virtuous circle. Simply put, the more visitors it attracts the more advertisers it can attract. They in turn will offer more and better deals, which will attract more visitors. Where Cheapflights has been especially successful is in understanding what both parties want and delivering it. For the advertisers that means high-quality leads – the conversion rate is said to be somewhere between 1 in 10 and 1 in 20 – and for the travelling public, the sites offer accuracy, and tremendous breadth and accessibility of content. One of Cheapflights’ 10 guiding principles is to deliver design and navigation that would be ‘totally intuitive to an 85-year-old Aunt Agatha who is new to the internet’ and the company is relentless in its pursuit of refinements to its sites that will improve the users’ experience.

Building on its success in the UK Cheapflights has expanded into the immense US travel market and already, after just 26 months of trading, it is a top-15 travel web site with over a million users per month. The company has also diversified into hotel bookings through its sister brand, complete packages through, and short breaks through, all using the same ‘pay-per-click’ model and all growing fast.

‘It’s a challenge to keep your feet on the ground,’ says Bicket, ‘but if we focus on looking after the users, then the clicks will come.’


By Mat Wootton Deputy Head of AIM

2005 marks the 10th Anniversary of AIM, the London Stock Exchange’s market for growing companies. Mat Wootton, Deputy Head of AIM looks back over the last 10 years and discusses what the future holds.

Looking back, what have been the major successes of AIM?

It’s certainly a pleasure to mark the 10th anniversary of AIM with the market in such good health. Last year more companies joined AIM from more countries and raised more money than any previous year. Within the same year AIM also welcomed the 1000th company and the 100th international company to the market.

A large factor in AIM’s success has been its broad appeal – since the market’s launch 10 years ago, companies from over 30 business sectors have joined the market. This wide industry representation has ensured the market has survived such difficult periods as the fallout from the ‘ bubble’, which proved so problematic for more narrowly focused growth markets such as the Neuer Markt, which closed in June 2003.

AIM has also proved attractive outside the UK domestic market, with 144 international companies from 15 countries as at the end of May 2005. This global appeal is attributable to AIM’s flexible regulatory environment, the strong international brand, and of course the support of one of the world’s largest and most experienced international financial centres.

Perhaps the most obvious representation of AIM’s success is the increased involvement of the institutional investment community, whose holdings now account for around 40% of the value of the market and more than 80% of value traded. Strong institutional interest gives AIM companies access to larger pools of capital – more than £17bn has been raised on AIM, with over 40% of this from further issues.

What have been the key changes in the past 10 years?

While AIM’s market model and overall regulatory structure has remained broadly consistent AIM has changed beyond many initial expectations in terms of its size, market participants and investor base.

One of the most dramatic changes is how the market is perceived in the broader financial community. AIM is now widely regarded as the most successful growth market in the world, a far cry from its launch when it faced a broadly dismissive reception.

Although the overall regulatory and market model has remained remarkably constant since the market’s launch, new European directives have prompted the change in AIM’s regulatory status, from an EU "Regulated Market" to an "exchange regulated market", a change which is designed to preserve the structure that has been so fundamental to AIM’s success.

What are the key benefits that AIM holds over a Main Market listing?

The London Stock Exchange deliberately offers companies a choice of markets to serve the needs of a range of different sizes and profiles of companies.

AIM’s regulatory model and market structure are specifically designed to support the requirements of smaller, growing companies, and can enable companies to access public markets at an earlier stage in their development than would otherwise be possible. Perhaps the key benefit of AIM is the ease with which AIM companies can execute corporate transactions, a key feature and attraction to companies wishing to grow rapidly.

The Main Market is designed for more established and larger companies and provides access to a much broader range of investors particularly overseas. The Main Market also provides access to attribute groups such as techMARK and techMARK mediscience. We continue to encourage AIM companies to move to the Main Market when they are ready and able to take advantage of these benefits.

Where are new AIM floats currently coming from? How has this developed over the last 10 years?

Recent admissions continue to come from a broad range of business sectors, with companies from the telecommunications, leisure and natural resources sectors being particularly notable.

AIM has become significantly more international in recent years, with the number of overseas companies more than doubling since the end of 2003, to 144 at the end of May 2005.

What markets do you view as the main competition to AIM and why?

AIM operates in a highly competitive environment; companies considering a flotation on a public market for the purpose of raising capital also have the option of accessing alternative sources of financing such as private equity or bank finance. As we increase our international presence and seek more non-domestic flotations on AIM, we are competing against other growth markets such as Nasdaq, the Canadian Venture Exchange, and other growth markets in North America and Europe.

With AIM being so visibly successful, we are beginning to see other exchanges try and replicate this success by announcing plans to establish their own growth markets, which could potentially be additional sources of future competition for AIM.

To date, AIM has resisted demands for greater regulation from Europe, can this continue?

The London Stock Exchange devotes a significant amount of time and resource to monitoring and engaging in the EU process. We pioneered AIM’s change to exchange regulated status to ensure that AIM could continue to operate as close to its current form as possible. The Exchange owns, runs and operates AIM, and because of this we have complete flexibility to ensure that the unique regulatory structure of AIM continues.

Do you believe that the introduction of the prospectus directive to law will have any impact upon the attractiveness of AIM?

In October 2004 AIM changed regulatory status in response to the new European Directives. The change was designed to preserve the current structure of AIM as far as possible and maintain the flexibility that small growing companies need, whilst retaining the high standards of regulation that have characterised its development. Through this change, AIM companies will only find themselves affected by the Prospectus Directive where they are doing a public offer that breaks the exemption limits, rights issue or paper takeover which triggers the directive and is over the exemption limits. Recent clarification by the Treasury on the treatment of discretionary private client brokers also helps to reaffirm that AIM will not be less attractive in the new Prospectus Directive environment.

Finally, what 3 pieces of advice would you offer to a management team of an organisation considering floating on AIM?

Selecting the right advisers is key – conduct a ‘beauty parade’ and choose those who can best fulfil your company’s needs. Ensure that you are prepared for the intensity of the process involved in coming to a public market and the time it takes to get there.

Be prepared for a change – board members and other employees will need to accept the disciplines that accompany having shares traded on a public market, including the closer scrutiny of the company and it’s performance.

Undertake an active IR and communications strategy both prior to and following your flotation and treat shareholders like customers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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