The government must take “urgent action” to revive London’s junior stock markets AIM and Aquis or risk more firms flooding overseas this year, a top City group has warned.

In a new report today, The City UK, a trade body representing the UK’s financial services sector, called on the Chancellor Rachel Reeves and financial regulators to more easily allow amateur investors to access smaller exchanges and establish a new “growth markets industry group” to champion the needs of smaller exchanges.

Regulators should also intervene to streamline the way the way that smaller firms can graduate from AIM on to London Stock Exchange’s main bourse, the group warned, amid fears that too few companies are making the transition.

“The health of the UK growth markets is the responsibility of all who engage with them, and we urge the government and regulators to work with industry to supercharge their competitiveness, ensure they can continue to support innovative and growing companies, and enable growth right across the country,” said Miles Celic, boss of the City UK.

The warnings come after more than 90 firms ditched their listing on the London Stock Exchange’s AIM exchange last year as the bourse shrank at its fastest pace on record.

Both AIM and its rival Aquis, which is set to be bought by Swiss exchange operator SIX, have also been hit by a dearth of new IPOs as firms shun the public markets and stay private for longer.

Celic warned that a “lack of focus” on the smaller exchanges from government and regulators, as well a dwindling pool of international investors, had forced firms to access capital in foreign jurisdictions.

Fears over the future of AIM grew last year when Rachel Reeves slashed by half a key inheritance tax relief on AIM shares.