Investors Pull Out of UK Stocks at Fastest Rate in Two Decades, Bank of America Survey Shows

Investors are withdrawing from UK equities at the fastest pace in more than 20 years, a Bank of America survey of fund managers found, in a sign of growing unease about the country’s economic and fiscal outlook ahead of the November Budget.

The survey of 165 fund managers — who together manage about £315 billion in assets — reported that respondents were, on average, 20% “underweight” in British stocks in September, down from a 2% underweight position in August. Bank of America said the shift represented the biggest swing out of UK shares since 2004 and the second-largest move in the survey’s history.

The bank’s investment strategist Elyas Galou said UK assets were “the most unloved assets right now” and that some investors were approaching the UK “as if it were an emerging economy.” Fund managers cited concerns about a weak fiscal outlook, an unpopular government and a macroeconomic backdrop dominated by stagflation, Galou told the bank’s survey respondents. The allocation to UK stocks fell to its lowest level since March 2024.

Hugh Sergeant, a fund manager at River Global Investors, said investors were “terrified of this government, and particularly the next Budget.” The survey’s findings come as Chancellor Rachel Reeves prepares to set out measures in November to address a public finance gap that some reports estimate could reach up to £50 billion a year.

Survey respondents were otherwise relatively upbeat on equities: Bank of America noted that the managers were the most positive on stocks overall since February. Despite that broad optimism, UK exposure was cut sharply, reflecting a growing preference for non-UK markets.

Market participants and lobby groups have pointed to several specific drivers of the shift away from London. Dealers and corporate executives have increasingly criticised the UK’s tax and regulatory environment, and several high-profile companies have either been acquired or moved primary listings to New York. The Confederation of British Industry has urged bold reforms to reinvigorate the London Stock Exchange, including calls to remove stamp duty on share purchases, a 0.5% levy that applies only to UK equities and that critics say discourages domestic investment.

The Bank of America survey also coincides with renewed market bets against sterling. The newspaper reporting the survey said speculators had placed their heaviest short positions against the pound since the market turmoil that followed former Prime Minister Liz Truss’s 2022 mini-budget. Those positions, and broader investor positioning, have been interpreted by some as a signal of heightened anxiety about fiscal policy ahead of the autumn Budget.

Analysts noted a contrast between the UK and other major economies. Whereas managers saw the US and some European economies as potentially achieving a soft landing, many respondents believed the UK faced a greater risk of stagnating growth coupled with persistent inflation. That outlook has weighed on interest in UK equity flotations, and officials in government and industry have warned that further tax rises or policy uncertainty could deter new listings and long-term investment.

Opposition politicians seized on the survey results. The shadow business secretary said the findings showed investors and firms were losing faith in the UK under the current government, while business groups argued for reforms to make the London market more competitive.

Bank of America’s results are a snapshot of sentiment among a specific group of global fund managers and reflect their allocations and views at a point in time. The coming weeks, and the measures announced in the November Budget, will be watched closely by investors and corporate treasurers for indications of whether the outflows and reduced UK weightings persist.