Budget worries saw savers sell-down equities at record rate

Budget fears saw investors pull a record £6.7 billion out of stocks and shares funds in the two months leading up to last week’s fiscal event, figures show.

Another £3.02 billion in equity fund outflows last month, following £3.63 billion in October, means investors have now sold down equities for a record six consecutive months, in the “most prolonged and most severe bout” of selling, according to global funds network Calastone.

It said £10.39 billion of equity fund holdings have been sold down between June and November.

The data shows outflows came to a “sudden halt” on Budget day – November 26 – with equity fund inflows resuming on that day and the final two trading days of last month.

Edward Glyn, head of global markets at Calastone, 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 sudden halt in equity fund outflows that took place after the Budget was delivered is clear evidence that many investors were selling their holdings as concerns rose at the possible curtailment of pension lump sum withdrawals, or of further capital gains tax hikes.”

It followed intense speculation in the run up to the Budget, with worries over tax hikes, as economists feared Chancellor Rachel Reeves would have to plug a £50 billion hole in the nation’s finances.

There were moves to boost investment in UK shares in the Budget, such as a three-year stamp duty holiday for stocks bought in new London listings.

But there was a blow to investors with an unexpected increase in dividend tax, rising by 2% for basic and higher rate taxpayers next year.

The figures from Calastone showed North American and UK-focused equity funds were the hardest hit by outflows, with the former seeing a record £812 million and the latter £847 million.

Alongside the Budget worries, appetite for equities is also likely to have been impacted by concerns that the artificial intelligence (AI) and US tech bubble may be on the brink of bursting.

Investors flocked to safe haven investments, with money-market funds seeing record inflows of £1.25 billon in November.

Mr Glyn added: “It’s hard to disentangle Budget jitters from nerves about equity valuations, but the inflows to safe haven money-market funds do indicate rising risk aversion.”