Andy Burnham’s rise to prime minister coincided with one of the largest equity market outflows since 2025’s Budget, according to the most recent Calastone fund flows index.
In July, investors withdrew a net £1.61bn from equity funds as uncertainty of UK economic policy and tax under the new government started to bite. This was the highest level of selling since October and November last year, when uncertainty over the autumn led to investors pulling more than £3bn from equity funds both months.
UK-focused funds suffered the largest chunk of outflows, with investors pulling roughly £948m from the asset class, following a £248m outflow in June. The report noted that since June 2020, roughly £52bn has left UK equity funds, with only four months of inflows since.
That said, while UK equity funds experienced the most outflows, money was pulled from most equity sectors, with global equity funds, emerging markets, sector funds, Asia, China and Japan all down in July.
This was yet another poor month for the actively managed cohort. While passive funds saw £1.43bn inflows, £3bn left active managers, the third worst performance in Calastone’s 11-year record.
Notably, multi-asset funds, which have been a reliable stalwart since the October 2022 mini budget, experienced a turnaround in June. Investors removed £463m from the asset class overall, driven by sell orders hitting a new record.
See also: Calastone: Investors drop equities as bond funds experience best month in three years
Edward Glyn, head of global markets at Calastone, said: “Tax rises – and even speculation about tax rises – change investor behaviour.
The evidence increasingly suggests that policy unpredictability is unnerving investors almost as much as the tax measures themselves.”
As an example, Glyn explained the decision in the last budget to bring pensions into inheritance tax has caused more pension holders to extract capital from their funds.
“We have never recorded such a sustained run of equity fund outflows, and the trend began in June 2025 as concerns started to build ahead of Rachel Reeves’ autumn Budget.”
He also noted that strong stock market performance may have made this decision easier for some investors. Indeed, year to date, despite significant volatility, most global market indices are currently up, with even the FTSE All Share up 11.7%, according to data from FE fundinfo.
“Booking a profit is psychologically much easier than crystallising a loss,” Glyn added.
With speculation that the new government could further target wealth, some investors may be taking precautionary action, the report said.
“Even as the new government begins to outline its fiscal agenda, investors are still weighing what it could mean for capital gains, pensions and wider wealth taxation,” Glyn said. “Investor confidence is being eroded by fear of the unknown.”
That said, there were some positives in the data. European equity funds were broadly flat, while North American funds were the only equity sector to see inflows, rising by £227m.
Fixed income funds continued to enjoy inflows, rising by £179m in July. However, it should be noted that these were significant declines from June and May, when the asset class enjoyed £1bn of inflows and £877m, respectively.
See also: ‘Short-lived’ boost for Burnham as inflation falls
