Fund managers are dumping UK stocks at the fastest pace since Liz Truss’s disastrous mini-Budget as investors give a thumbs-down to Labour.
A Bank of America poll showed global fund managers have over the past three months slashed exposure to Britain by the most since October 2022.
It was the latest blow to hopes of a revival for London’s beleaguered financial markets as the FTSE 100 suffered another painful sell off, tumbling 1.3 per cent, or 123.13 points, to 9552.3.
The Footsie has suffered four days in a row of declines, its worst run since August, amid a global stock market slide fuelled by worries over an artificial intelligence bubble and prospects for the US economy.
And investors believe Rachel Reeves is doing little to help, with a report card compiled by wealth manager Quilter finding 94 per cent rated her performance at no better than a ‘C’ grade.
The latest figures illustrate how much the City has lost faith in the Chancellor since she took office last year – with hopes that Labour’s solid majority would help her boost growth and repair public finances.
Black hole: Chancellor Rachel Reeves is under pressure to deliver politically-damaging tax hikes and spending cuts
Those hopes have been dashed after a disastrous £25billion raid on National Insurance (NI) pushed inflation and unemployment higher and the Government failed to enact welfare reforms thanks to opposition from Left-wing backbench MPs.
Bank of America’s survey showed fund manager allocation to the UK is the lowest since January 2024 – a blow to the City after recent hopes that the beleaguered London market is recovering.
The pessimism about UK stocks extended into next year, with the FTSE 100 judged the least likely to have a stand-out 2026.
Just 3 per cent expect the blue-chip London index to outperform compared to 13 per cent for New York’s tech-focused Nasdaq and 10 per cent for the Euro Stoxx index.
And Quilter’s survey of fund managers representing £22 trillion of assets gave the Chancellor a ‘must do better’ rating.
It found 69 per cent awarded her a ‘C’, indicating that she must improve, while 25 per cent awarded Reeves a D or E, pointing to ‘significant concerns’.
None gave an ‘A’ and only 6 per cent rated the Chancellor a ‘B’, suggesting she was ‘doing a good job but still has room for improvement’.
Investors in the report pointed to the ‘problematic’ decision to hike NI and the Chancellor’s inability to control spending.
She is under pressure to deliver politically damaging tax hikes and spending cuts to repair a black hole in the public finances.
Lindsay James, investment strategist at Quilter, said: ‘Her final report card will hinge on the detail of the Budget. Whichever way the Chancellor decides to go, it is likely to trigger some fiscal volatility for the UK.’
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