MARKET NEWS

British investors are pulling cash out of global stock market funds at a record pace over fears that the Chancellor will mount a fresh tax raid at her Budget.

Nearly £7.3bn has been withdrawn from equity funds by UK-based investors since July, the largest outflow ever recorded in a four-month period, according to new data.

Edward Glyn, head of global markets at Calastone, which compiled the findings, said there was “growing concern about Rachel Reeves’s Budget and the anticipated tax implications”.

He said: “For some, it’s a simple matter of crystallising capital gains in case rates go up. This drove a huge uptick in selling this time last year and it’s clearly round two in 2026.”

The new data follows a wider sell-off in US markets over fears that much-hyped artificial intelligence (AI) stocks are due a correction.

However, hopes that a historic US government shutdown was nearing its end buoyed US stocks on Monday, with the FTSE 100 closing at a record high.

‘The only rational choice for many’

In October alone, investors withdrew £3.6bn from their holdings, marking the fourth consecutive month of outflows – the longest run since the Brexit referendum in 2016, Calastone said.

Economists have predicted the Chancellor will raise £38bn in the Budget later this month to plug a hole in Britain’s finances, just a year after putting up taxes by £41.5bn.

A tax raid of this scale, after only 17 months in power, would be more than any of her predecessors across any entire parliament since 1976.

Investors took out £1.2bn from UK-focused funds alone during October, Calastone said, taking the total outflows in the 12 months running up to this year’s Budget to £10.4bn.

Mr Glyn said: “Speculation on policy has made this drastic step the only rational choice for many, even if it may ultimately harm their longer-term financial goals.”

US-focused investments were also hit as concerns deepened over the stretched valuations of tech stocks linked to AI with North American funds shedding £649m – their third worst month on record.

Mr Glyn said there were “nerves about global equity prices, especially in the US”.

It helped drive record flows of cash into money market funds, considered a safe haven in times of turmoil.

Investors put £955m into the low-risk investment vehicles during October while £589m was put into fixed income funds, largely focused on corporate bonds.

“Outflows from global, US and tech funds are all part of that story,” Mr Glyn said.

He added: “Fears of high share prices also explain why money market and fixed income funds both had a good month – cash rolling out of equity funds needs somewhere to go, especially for those who don’t want to lose the tax protection of an Isa or pension wrapper.”

The exodus comes as The Telegraph revealed that the Chancellor is poised to increase the tax rate on earnings from shares in her Nov 26 Budget.

The Chancellor is expected to put up the rate of dividend tax in a move that will hit investors but could raise up to £2bn. Ms Reeves is also expected to put up income tax and target pension savings in a bid to balance the public finances.

Investors have also endured a period of turmoil in stock markets in recent weeks as many have become wary about the surging valuations of tech companies linked to AI.

More than $1tn (£760bn) was wiped off the value of America’s eight largest AI-linked stocks just last week, marking the worst week for the Nasdaq since April.

It followed warnings from the bosses of Goldman Sachs and Morgan Stanley last week about a correction in stocks.

The comments came just as Michael Burry, the US investor who predicted the 2007 housing market crash depicted in the film The Big Short, wagered $1.1bn betting that shares in Nvidia and software company Palantir will decline.