Market News

Rachel Reeves’s drawn-out Budget build-up triggered a record stampede out of stocks among British investors, new figures show.

UK investors pulled more than £10bn out of global stock markets over the last six months, the longest and most severe period of selling on record, according to data provider Calastone.

October was a record month for ditching stocks, with net £3.6bn of outflows. November was the second-worst month on record, with £3bn withdrawn from equity funds.

Edward Glyn, head of global markets at Calastone, blamed the unusually long build-up to November’s Budget, which was punctuated by repeated leaks of possible policies and about-turns.

He said: “The political narrative has played havoc with UK savers in recent months. Never have we seen such consistent or large-scale selling before.

“The recent period of policy uncertainty has clearly unsettled investors and, in some cases, prompted reactive decisions they may later regret.”

Equity funds have now seen net withdrawals from UK investors for six consecutive months, the longest period of continued selling since Calastone first started collecting data in January 2015.

Over the last six months, £10.4bn has been pulled from global stock markets by British traders, making it also the most severe period of selling on record.

Mr Glyn said the scramble appeared to be motivated by fears that tax-free lump sum pension rules would be tightened and concerns that capital gains tax would be increased in the Budget.

North American and UK-focused equity funds were hardest hit by the sell-off, with the former shedding a record £812m, while the latter saw net selling of £847m.

Equity funds focused on the UK have struggled in particular with British investors. Only one month out of the last 55 has seen inflows to UK-focused funds.

That month of inflows, in November 2024, only came as investors recycled cash back into funds after taking it out in the run-up to Ms Reeves’ first Budget.

Last month, only Europe-focused funds saw inflows from British investors – of just £78m.

Britons instead opted for safe-haven options, with money-market funds taking in a record £1.25bn, beating the previous record set last month of £955m. Fixed income products also remained popular, with £643m of inflows.

“Investors don’t like uncertainty and there has been an element of uncertainty leading up to the Budget,” Mr Glyn said.

“Now that that stake has been put in the sand and investors and their advisors know what is the status quo, it will be interesting to see what happens about flows coming back into the market and where those flows are allocated.”

Calastone said that withdrawals from UK investors ceased on Budget day itself, with cash flowing back into stocks for the remainder of the month.

Ms Reeves introduced a £2,000-a-year cap on the amount workers can put into their pensions tax free under salary sacrifice schemes. The policy will come into effect from April 2029.

Investors may seek to stuff their pensions ahead of the cap coming into effect, Mr Glyn said. They could potentially boost the stock market as pension funds then use that cash to invest.

“Are people going to shore up their pensions because they want to potentially put as much as possible from a tax efficient point of view before the rules change in a couple of years time?

“It’s going to be really interesting to see what happens over the course of perhaps the next few months,” he added, noting that much of the flow of money in and out of equity funds from the UK comes from regular savings accounts.