British investors withdrew their money from the stock market at an unprecedented rate during 2025, creating the largest capital flight on record as fears over government Budget plans triggered a rush towards safer assets.
A Historic Sell-Off Driven by Budget Fears
According to data from the global funds network Calastone, equity fund outflows hit £6.7bn in 2025. This figure is more than double the £3.3bn withdrawn in 2016, the year of the Brexit referendum. The selling persisted for seven consecutive months, from June to December, with a total of £10.6bn pulled out in that period alone.
The trend highlighted a stark divide between active and passive investment strategies. Actively managed funds suffered severely, losing £18.9bn in capital over the year. In contrast, passively managed funds attracted £12.2bn of inflows. For the first time since 2015, passive global equity funds proved more popular than their active counterparts.
Edward Glyn, head of global markets at Calastone, stated: “The sudden, dramatic slowdown in outflows between November and December is a clear indicator that months of pre-Budget speculation contributed to the record outflows from equity funds between June and Budget Day.”
The Scramble for Safe Havens: Cash and Bonds
As confidence in equities waned, investors pivoted sharply towards assets perceived as lower risk. Money-market funds, which offer the safety of cash, had a record-breaking year, attracting net inflows of £5.84bn.
Fixed income funds also saw increased interest, with inflows rising by 50 per cent to £1.51bn. However, this remained less than half the decade's average, reflecting volatile conditions in the bond market driven by inflation and fiscal policy concerns.
Glyn commented on this shift: “Record money market inflows point to investors favouring the safety of cash, suggesting they perceive equity valuations to be teetering after a dramatic 2025 bull run. Solid inflows to mixed asset funds and fixed income support the notion that risk-off is the name of the game at present.”
Property and Equity Markets Show Tentative Signs
While the broader trend was one of retreat, there were signs of easing pressure by year's end. December's equity fund outflow of £188m was the smallest since June, with North American funds leading a notable recovery.
Despite the FTSE 100 reaching record highs, UK equities remained deeply unpopular, enduring a tenth consecutive year of withdrawals. UK-focused funds still saw net selling of £541m in December, only a slight improvement from November's £847m.
The property sector mirrored this tentative stabilisation. Outflows from property funds slowed to £745m in 2025, down from £1.2bn the previous year. Glyn noted this reflected “a shift towards stabilisation rather than renewed demand.” An expected interest rate cut from the Bank of England in 2026 may provide a boost, but analysts say “sustained economic growth” is the real key to a property fund recovery.
