UK Penny Shares in 2026: Risks, Research Considerations and Examples

What Is a Penny Stock? (Definition for UK Investors)

In the UK, a penny stock typically refers to shares trading below £1 on the London Stock Exchange or its junior market, the Alternative Investment Market (AIM). The definition differs from the US market, where penny stocks include any shares priced under $5.

Key characteristics of UK penny shares include:

• Share prices typically below £1 (up to £5 in some definitions)

• Market capitalisations often under £100m

• Trading primarily on AIM rather than the main LSE market

• Lower trading volumes, meaning reduced liquidity

• Higher price volatility compared to large-cap stocks

• Limited analyst coverage and institutional ownership

The Alternative Investment Market exists specifically for smaller, growing companies. These businesses face fewer listing requirements than main market companies, which creates opportunities for earlier-stage investment but also reduces investor protections.

UK Penny Stocks to Watch Right Now

The following 10 stocks span multiple sectors and represent varying risk profiles. All prices and market data are subject to change. Past performance does not indicate future results, and you could lose your entire investment in any of these companies.

Data sourced from Yahoo Finance, 23 January 2026. Prices fluctuate daily.

Serabi Gold [SRB] – Mining/Resources Sector

Company Snapshot

Serabi Gold operates exclusively in Brazil, focusing on gold production from its Palito Complex.

Investment Case

The company reported production of approximately 44,000 ounces in 2025 up from 37,000 in 2024. with ambitions to reach 53,000–57,000 ounces in 2026. Rising gold prices have helped increase revenue significantly, according to company statements from September 2025. The Coringa project represents a potential growth catalyst for future production expansion.

Key Risks

• Operational challenges inherent to mining in remote locations

• Commodity price fluctuations directly affecting revenue and margins

• Currency exposure to the Brazilian real

• Geographic concentration in a single country with political and regulatory risks

• Environmental liabilities and permitting uncertainties

Pensana [PRE] – Energy Transition Sector

Company Snapshot

Pensana positions itself within the rare-earth metals supply chain, producing materials used in electric vehicles (EVs) and offshore wind turbines. The company operates a renewable-powered refinery near Hull, England, and holds the Longonjo rare-earth deposit in Angola.

Investment Case

Pensana’s investment thesis relies on developed nations reducing dependence on China for rare-earth refining, creating demand for alternative suppliers. Strategic importance of rare-earth metals in green technology manufacturing supports long-term demand growth.

Key Risks

• The company remains pre-revenue and speculative

• Mining projects face substantial completion risks and cost overruns

• Financing challenges may require dilutive capital raises

• Uncertain commodity pricing for rare-earth elements

• Competition from established Chinese producers with cost advantages

NIOX Group [NIOX] – Biotech/Healthcare Sector

Company Snapshot

NIOX designs and manufactures medical devices for asthma diagnosis and monitoring. The company sells globally and its NIOX device measures fractional exhaled nitric oxide, helping clinicians diagnose and manage airway inflammation.

Investment Case

NIOX operates debt-free with short-term assets significantly exceeding liabilities. The specialised diagnostic niche provides competitive differentiation in the respiratory care market.

Key Risks

• Healthcare device companies face regulatory hurdles across multiple jurisdictions

• Reimbursement challenges from healthcare systems and insurers

• Competition from larger diagnostic firms with greater resources

• Continuous investment in research and development required to maintain market position

Skillcast [SKL] – Technology/AI Sector

Company Snapshot

Skillcast provides compliance software solutions to major institutions including Tesco, Barclays and Schroders. The platform helps organisations manage regulatory compliance training and reporting.

Investment Case

The company reported 18% revenue growth for the first half of 2025, with subscription revenue increasing 23%, according to company filings. The share price has trended upward and currently trades near all-time highs. Blue-chip client base provides revenue stability and credibility.

Key Risks

• Artificial intelligence presents both opportunity and threat to compliance software

• Small-cap software companies face acquisition risk at potentially unfavourable terms

• Customer concentration risk if major contracts dominate revenue

• Challenge of scaling sales operations against larger competitors

• Regulatory changes could reduce compliance training requirements

Ilika [IKA] – Technology Sector

Company Snapshot

Ilika specialises in solid-state battery technology, targeting markets including miniature medical implants, industrial sensors and EVs.

Investment Case

The company claims minimal competition in the miniature battery sector for active implantable medical devices, according to its most recent annual filing with the LSE. Solid-state batteries represent a potentially transformative technology with applications across multiple high-growth industries. Success in medical device batteries could provide a stepping stone to larger automotive opportunities.

Key Risks

• This represents a pre-commercial, speculative opportunity

• Success depends on securing commercial partnerships with uncertain timelines

• Transition from development to scaled production carries execution risk

• Battery technology companies require substantial ongoing capital investment

• Share dilution through capital raises remains realistic if additional funding needed

Begbies Traynor [BEG] – Business Services Sector

Company Snapshot

Begbies Traynor provides business recovery, corporate insolvency, restructuring and financial advisory services across the UK. The firm helps businesses navigate financial difficulties through debt restructuring, asset recovery and turnaround strategies.

Investment Case

The business model operates counter-cyclically. Economic uncertainty and rising insolvency cases typically increase demand for Begbies Traynor’s expertise. UK insolvency rates have risen during periods of high interest rates and economic pressure, creating sustained demand for specialist advisory services.

The company holds a leading position among independent UK insolvency practitioners. Recurring client relationships with banks and accountancy firms provide revenue visibility. Management has demonstrated consistent execution over multiple economic cycles.

Key Risks

• Economic recovery could reduce insolvency volumes and revenue

• Reputational sensitivity inherent to insolvency work

• Competition from larger professional services firms with deeper resources

• Regulatory changes affecting insolvency practitioner fees or procedures

• Key person dependency on senior partners and their client relationships

Luceco [LUCE] – Electrical/EV Charging Sector

Company Snapshot

Luceco supplies lighting, wiring accessories and EV charging equipment for residential and commercial markets. The England-based company serves trade professionals and retailers across the UK and internationally.

Investment Case

The EV charging segment positions Luceco within the energy transition trend as UK households and businesses install charging infrastructure. Product diversification across lighting, wiring and EV charging reduces dependency on any single category. The company serves both new construction and renovation markets, providing some insulation against housing market cycles.

Key Risks

• Construction sector downturns directly impact demand

• Commodity price exposure on copper and other raw materials

• Competition from established electrical manufacturers

• Consumer spending sensitivity affecting retail channel sales

• Supply chain disruption risks given international sourcing

Corero Network Security [CNS] – Cyber Security Sector

Company Snapshot

Corero Network Security specialises in Distributed Denial of Service (DDoS) protection solutions. The company helps organisations defend against malicious attacks that attempt to overwhelm servers and networks with traffic floods.

Investment Case

Revenue has grown from $16.9m in 2020 to $24.6m in 2024, while annual recurring revenue has grown from $9.8m to $19.5m in the same period. A customer retention rate of around 97% points to the company’s ability to attract sustained cash flows.

Cyber security spending continues increasing as organisations face escalating threat landscapes. DDoS attacks have grown in frequency and sophistication, sustaining demand for specialist protection solutions. The recurring revenue model from subscription services provides income visibility.

Key Risks

• Competition from well-funded cyber security giants with broader product suites

• Technology obsolescence requiring continuous research investment

• Customer concentration if major contracts dominate revenue

• Small company scale limits marketing reach and brand awareness

• Potential acquisition target, which may or may not benefit shareholders

Gear4music [G4M] – Retail Sector

Company Snapshot

Gear4music operates as Europe’s largest online retailer of musical instruments and music equipment. The company sells guitars, drums, keyboards, recording equipment and accessories through its e-commerce platform.

Investment Case

H1 2026 results reported in November 2025 showed revenues of £80.75m and net income of £2.7m, reversing a previous loss of £1.2m in H1 2025. The return to profitability demonstrates operational improvements and cost discipline.

The company has invested in distribution infrastructure and brand development across European markets. Online retail continues gaining share from traditional music shops. Gear4music’s specialist focus creates customer loyalty and repeat purchasing patterns.

Key Risks

• Consumer discretionary spending sensitivity during economic downturns

• Margin pressure from competitive pricing and delivery cost inflation

• Inventory management challenges across wide product ranges

• Currency exposure from European sales and international sourcing

• Dependence on digital marketing effectiveness and search visibility

Windar Photonics [WPHO] – Clean Energy Sector

Company Snapshot

Windar Photonics develops LiDAR-based sensors that help wind turbines align more accurately with wind direction, improving energy output and operational efficiency.

Investment Case

Windar’s technology has been adopted by several turbine manufacturers and wind farm operators. As renewable energy projects face pressure to reduce costs, even small improvements in turbine output create meaningful profitability gains for operators.

Wind energy capacity continues expanding globally as countries pursue decarbonisation targets. Windar’s sensor technology addresses a specific efficiency challenge, creating potential for scalable commercial growth as installations increase.

Key Risks

• The company remains loss-making while pursuing commercial expansion

• Customer adoption rates may disappoint expectations

• Continued investment required before reaching sustained profitability

• Competition from alternative efficiency technologies or larger sensor manufacturers

• Wind energy policy changes could affect project development timelines

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Penny Stock Trading vs Investing: Key Differences

Before selecting a platform, understand whether you intend to trade or invest. The distinction affects tax treatment, product selection, risk exposure and platform requirements.

Trading involves shorter time horizons, typically days to weeks. Traders use technical analysis to identify price patterns and momentum. Products include contracts for difference (CFDs) and spread bets, which involve leverage. Leveraged products amplify both gains and losses, meaning you can lose more than your initial deposit.

Investing focuses on longer time horizons, typically months to years. Investors analyse company fundamentals including revenue growth, profitability and competitive positioning. Direct share ownership limits losses to the amount invested and qualifies for ISA tax shelters.

Important Risk Warning: Spread betting and CFD trading involves substantial risk. According to FCA disclosures, approximately 80% of retail investor accounts lose money when trading CFDs. These products suit only experienced traders who fully understand leverage mechanics and can afford potential losses exceeding their deposits.

Long-term investing in penny shares through a Stocks and Shares ISA offers tax efficiency on capital gains and dividends. AIM shares held for at least two years may qualify for Business Property Relief, potentially reducing inheritance tax liability. Seek professional tax advice for your personal circumstances.

How to Find and Buy Penny Stocks in the UK

Selecting the right platform depends on your investment approach, experience level and the features you need.

What to Look for in a Penny Stock Platform

For Long-Term Investors

If you plan to buy and hold penny shares, prioritise these features:

• ISA availability: Stocks and Shares ISAs shelter gains from capital gains tax. Confirm your platform offers ISA accounts with AIM share access.

• AIM market coverage: Not all platforms list every AIM stock. Check availability of specific shares before opening an account.

• Dealing fees: Commission charges erode returns, particularly on smaller position sizes. Compare transaction costs for your expected trading frequency.

• Research tools: Company news, financial statements and analyst coverage help inform investment decisions. Evaluate the depth of fundamental research available.

• Dividend handling: Understand how the platform processes dividend payments and whether automatic reinvestment options exist.

• Customer service: Smaller companies sometimes require manual dealing. Assess telephone dealing availability and response times.

For Active Traders

If you plan to trade penny stocks more frequently using CFDs or spread bets, consider:

• Execution speed: Volatile penny stocks require fast order execution to achieve intended prices.

• Charting capabilities: Technical analysis demands advanced charting with multiple timeframes and indicator overlays.

• Real-time pricing: Delayed quotes create execution risk. Confirm live price feeds are included or understand additional costs.

• Risk management tools: Stop-loss orders, guaranteed stops and margin alerts help manage leveraged positions.

• Leverage options: Understand margin requirements and maximum leverage available on penny stock CFDs.

• Mobile functionality: Active trading requires reliable mobile apps for monitoring and order management.

• Educational resources: Leveraged products carry substantial risk. Quality platforms provide comprehensive trading education.

CMC Markets vs CMC Invest: Platform Comparison

CMC offers two distinct platforms serving different investor needs. CMC Markets provides CFD and spread betting services for active traders, while CMC Invest offers £0 commission for eligible UK share trades for long-term investors. Other costs such as FX conversion and spreads may apply.

The following table outlines structural differences between CMC Invest and CMC Markets. Investors should consider whether they understand the risks of each product.

CMC Markets suits experienced traders comfortable with leveraged products. The platform provides institutional-grade charting, extensive technical indicators and sophisticated order types. However, CFD trading carries substantial risk, and losses can exceed deposits. The platform requires understanding of margin requirements and leverage mechanics.

CMC Invest suits investors seeking straightforward share ownership without leverage complexity. Commission-free trading on UK and US shares reduces costs for buy-and-hold strategies. ISA availability enables tax-efficient investing. The simplified interface prioritises ease of use over advanced functionality.

Note that tax treatment depends on individual circumstances and may change. ISA and BPR eligibility is subject to HMRC rules.

Choosing Between Them

Select CMC Markets if you:

• Have trading experience and understand leverage risks

• Want to speculate on short-term price movements

• Need advanced charting and technical analysis tools

• Accept that losses can exceed your deposit

Select CMC Invest if you:

• Prefer owning shares directly without leverage

• Want ISA tax benefits on gains

• Plan to hold positions for months or years

• Prioritise simplicity over advanced features

Both platforms hold FCA authorisation and provide FSCS protection on eligible deposits. However, FSCS protection may apply in the event of firm failure and does not protect against investment or trading losses.

Consider starting with CMC Invest if you are new to penny stocks, then exploring CMC Markets only after gaining experience and fully understanding leveraged product risks.

AIM vs LSE: Where Penny Stocks Trade

The Alternative Investment Market differs from the main London Stock Exchange in several ways relevant to penny stock investors.

AIM companies face lighter regulatory requirements:

• No minimum trading history required

• No minimum market capitalisation threshold

• No requirement to float a minimum percentage of shares

• Nominated adviser (Nomad) system replaces full regulatory review

These reduced barriers enable smaller companies to access public markets earlier. However, they also mean less investor protection. AIM shares may not qualify for certain institutional investment mandates, potentially limiting demand and liquidity.

Some penny stocks trade on the main LSE market. These typically represent former mid-cap companies whose share prices have declined. Main market companies retain full listing requirements but may have experienced business deterioration leading to penny stock status.

Risks of Investing in UK Penny Stocks

Penny stocks carry elevated risks that distinguish them from established equities. Understanding these risks is essential before committing capital.

Volatility: Penny share prices can move 10% or more in a single session. Small market capitalisations mean modest buying or selling activity creates outsized price impacts. This volatility cuts both ways, creating losses as readily as gains.

Liquidity Risk: Trading volumes on many AIM stocks remain thin. You may struggle to exit positions at desired prices, particularly during market stress. Wide bid-ask spreads increase effective transaction costs.

Information Asymmetry: Smaller companies receive less analyst coverage. Management may possess material information unavailable to outside investors. Due diligence becomes more difficult and more important.

Failure Rate: Many penny stock companies fail entirely. Unlike diversified funds, individual share positions can fall to zero.

Manipulation Risk: Low liquidity makes penny stocks susceptible to pump-and-dump schemes. Coordinated buying artificially inflates prices before promoters sell, leaving later investors with losses. Be sceptical of unsolicited stock tips.

Dilution: Cash-constrained companies frequently issue new shares, diluting existing shareholders. This risk proves particularly acute for pre-revenue businesses requiring ongoing capital raises.

Position sizing offers partial protection. Some investors choose to restrict exposure to higher-risk shares. Any allocation decision should depend on individual circumstances and risk tolerance. Diversification across multiple penny stocks reduces company-specific risk but does not eliminate sector or market risk.

Bottom Line

UK penny stocks offer exposure to smaller companies with growth potential, but they demand careful research, disciplined position sizing and realistic expectations. The 10 companies highlighted here represent starting points for further investigation rather than recommendations.

Before investing, read company annual reports, understand business models and assess whether management can execute their strategy. Monitor cash positions closely, particularly for pre-revenue companies. Accept that some positions will fail while others may reward patience.

Use FCA-regulated platforms, consider ISA wrappers for tax efficiency, and never risk more than you can afford to lose. Penny stocks can form part of a broader portfolio strategy, but they should not dominate it.