Investors dump UK stocks as Budget rumours compound caution

UK equity funds have been hit with another month of outflows after investors dumped stocks in favour of cash and bonds.

Investors withdrew a net £601m from UK stock funds during August, driving a broader £315m net outflow across global equity strategies.

The retreat marks the fourth consecutive month of net selling globally and the 14th month of equity outflows over the past 15, according to the latest Fund Flow Index from global funds network Calastone. Since June 2025, investors have pulled £15.16bn from equity funds.
 
European stock funds registered £145m worth of outflows while North American funds lost around £3m.

Edward Glyn, head of global markets at Calastone, said selling in the UK had been compounded by caution over potential tax hikes at the Budget in October.

“Continuous Budget speculation is adding to that caution. If investors believe capital gains and pension tax breaks are in the firing line, some of them have a reason to act now rather than risk delay,” he said.

Fixed-income enjoys strong run on back of stock outflows

Chancellor John Healey did little to quash Budget speculation in a speech on Monday where he refused to rule out tax hikes in the forthcoming Budget on numerous occasions.

Healey is also facing amplified pressure from the global bound rout that has sent borrowing costs soaring. Some economists have forecast that the £23.6bn left in fiscal headroom could be slashed in half following pressures on gilt yields.

August marked the strongest month for money market funds since November, while bond inflows continue to attract healthy sums, Glyn added.

Instead of abandoning financial markets entirely, capital was being re-routed into fixed income, money markets and real assets offering steadier income and downside protection, he said.

Safe-haven money market funds, which invest almost exclusively in short-term, high-quality debt issued by governments and top-rated financial institutions, enjoyed their strongest monthly inflow since November taking in a net £364m. This was double the 12-month average.

Meanwhile, bond funds landed £407m in net new capital, securing its fourth straight month of positive inflows. Cash and fixed-income strategies combined have absorbed £8.7bn since equity outflows began last summer.