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Finance (No. 2) Bill

Yes. If a company is thinking of listing on the AIM market, it will bear several factors in mind, including the cost of that listing and compliance. If it is thinking of upgrading to the full London stock exchange, the cost of compliance and registering will also form part of its consideration. My point is that as the regime exists, it may encourage some AIM companies to go for a full listing when they otherwise would not be ready. They feel that they have no choice, because if they are going to remain in property, they need the tax exemptions to qualify as a REIT company. If they do not qualify and just sit on AIM, they may be vulnerable to takeover by fully listed companies that have that tax wrapper to enhance their power. My hon. Friend again makes an apposite point. We have established that there has been no definite announcement by any company to convert to residential REIT status. Moreover, residential property companies tend to be smaller, both by market capitalisation and the actual book value of their portfolio, than commercial property companies. While there are several residential property companies that might have little difficulty in obtaining REIT status on AIM—some 60 are registered on AIM—forcing them into a full listing before they are ready could be a serious impediment to them. The British Property Federation argued that point in a note on the subject:"““The property industry in the UK believes the consequence of limiting REITs to listed companies will be to unnecessarily limit the development of REITs because it heightens the barrier for new entrants to the UK REIT regime and as a consequence makes it that much more difficult for new REIT companies to form. Clearly, this has consequences for those seeking to establish new investment vehicles in traditionally under-invested property markets, such as the residential private rented sector.””" Fifthly, AIM is specifically designed to help emerging companies that wish to be open to public investment, but would find it difficult to sustain themselves on a recognised stock exchange at an early stage in their development. The London Stock Exchange describes AIM on its website as"““the most successful growth market in the world””." It continues:"““Since AIM opened in 1995””—" under a Conservative Government, I remind the House—"““more than 2,200 companies have been admitted and more than £24 billion has been raised collectively.””" As of May 2006, there were 1,528 companies, of which 1,266 were in the UK and 262 were international, listed on AIM. Those companies had a total market value of £74.2 billion and a turnover value of £28.6 billion, to May 2006. So AIM is a very successful market in its own right. Amendment No. 130 seeks therefore to open up the current clause 106 legislation to allow companies listed via AIM to convert to REIT status. That will enable the development of new or smaller companies in the REIT market, thus helping to ensure that REITs are a sustained, successful investment vehicle across the property market. Sixthly, and importantly, during the Committee of the whole House, the then Economic Secretary argued that an impediment to allowing REITs to list on AIM was that under EU law they would need similar listing opportunities on comparable EU exchanges. However, unlike our amendment at that stage, our amendment No. 130 specifically allows for that point. Moreover, the first condition of clause 106 is that to qualify for REIT status a company must be resident in the UK in any case, so even though a company could theoretically list on an alternative EU exchange rather than on AIM, given that it must be UK-resident to comply with the REITs regime generally, in most cases the most likely scenario would be for a UK listing, at least in the first instance. Common sense suggests that in the majority of cases a UK-resident company would probably register on AIM first, rather than going to one of the alternative EU markets. Even were that not the case, and the company registered on one of the alternative EU markets, why in principle need that be a showstopper? Will the Economic Secretary answer that question before we conclude the debate?