LONDON, Oct 17 Reuters Britain39;s smaller listed companies can reverse a doom loop, driven by plummeting valuations and higher costs and regulation, with help from broader tax exemptions and incentives, a think tank said on Thursday.

Smaller companies represent only 8 of the combined value of Britain39;s bourse. But they account for over 80 of listed UK companies, provide key jobs and investment and can become tomorrow39;s stockmarket darlings with help from the government, regulators and industry, New Financial said.

Two weeks before Finance Minister Rachel Reeves presents her first budget on Oct. 30, the think tank suggested extending exemptions from stamp duty, a tax on share trading, to include the smallest 250 listed firms along with differential rates on capital gains or dividends on British companies.

Making recommendations on tax and incentives a few weeks before a budget … is perhaps a foolish exercise.

But there is an opportunity for a new government focused on growth to adjust incentives for investment in smaller companies, it said in an analysis on the decline in smaller listed companies.

Reeves, whose party came to power in July on a promise to get Britain39;s economy growing, has ruled out raising the rates of income tax, national insurance and value added tax, but has also said she has to fill a 22 billion pound 29 billion hole in the public finances.

Smaller listed companies have borne the brunt of a collapse in demand by institutional and…