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Retail traders scared off UK investing by Rachel Reeves’ Budget

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Reeves is eying mortgage reform as a key growth driver.
Reeves is eying mortgage reform as a key growth driver.

Retail traders have been scared off from investing in the UK market in response to the most recent Budget from Chancellor Rachel Reeves, a new survey has found.

More than a quarter of retail investors (26 per cent) have cut their investment in the UK in response to the Budget, data from Graniteshares showed.

One in five of over 1,000 British retail investors surveyed last month said they expected to cut their level of investment in UK markets in 2025.

“Economic news in the UK has been relatively downbeat over the past six months and last year’s Budget has been criticised by businesses,” said Catarina Donat Marques, head of European retail strategy at Graniteshares.

Reeves’ October Budget introduced £40bn of new taxes, including a hike to capital gains tax, which has caused a wide-ranging slump in business confidence.

Another major deterrent for retail investors to put cash into British markets has been the strength of the US dollar, with 27 per cent of retail traders shying away from UK stocks as a result.

Since speculation over the contents of the Budget began in late September 2024, the pound has fallen from $1.34 to just $1.24, today.

Retail traders away from UK markets in the longer term, with as 61 per cent saying they had been disappointed with the performance of UK markets over the past three years, and 24 per cent stating they have switched investments away as a result.

Last year, the FTSE 100 grew only 5.7 per cent, compared to a 23.3 per cent return from the S&P 500. The dominance of the US-based Magnificent Seven has also led many retail shareholders to flock to American investments.

In total, around 23 per cent of UK retail traders said the percentage of their investment portfolio invested in British stocks and funds has fallen in the past three years, though a third estimated it has increased.

Nevertheless, UK retail investors are still focused on their home markets, with one in five estimating that half or more of their portfolios are invested in UK stocks and funds.