UK fund investors give government’s growth plans a ‘clear thumbs down’
British investors continued to flee London’s stock market in January in a “clear thumbs down” to the government’s growth agenda, according to a closely watched funds survey.
UK-focused equity funds shed some £1.07bn through January in the sixth worst month on record despite the FTSE 100 hitting an all-time high, according to data from funds group Calastone.
British equity funds have now shed cash for 44 of the last 45 months. The run of outflows was broken when investors poured back into the market following a lower-than feared capital gains tax hike at the Budget.
“UK fund investors seem to have given the government’s fretful growth narrative a clear thumbs down,” said Edward Glyn, head of global markets at Calastone said.
“The UK stock market reached all-time highs in January, but investors merely took this as an opportunity to get out while the going was good.”
London’s markets were given a boost as international investors poured into companies, partly driven by the weakness of the pound against the dollar.
The fund flows will pose a fresh headache to ministers as they look to catalyse investment into the stock markets and revive the City.
While Rachel Reeves has said growth is the government’s “number one mission”, consumer and business confidence has slumped on the back of the £40bn tax hikes laid out at the Budget.
Fears of a capital gains tax hike also pushed investors out of the market in the run up to the Budget.
However, US focused funds have continued to rake in cash despite volatility fuelled by Trump’s inauguration and fears of growing AI competition.
“Apparently nothing can dent the enthusiasm for U.S. stocks, however. Even the DeepSeek AI shock that happened late in the month spurred appetite rather than fear,” Glyn added, noting that a day after the DeepSeek-induced selloff, North American equity funds notched their best day of the month for net inflows.
Fixed income funds saw a sharp drop in inflows as government bond yields jumped before calm returned to the market later in January, Calastone said.