UK investors shy away from London-listed equities

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Private UK investors look set to have withdrawn the highest amount in more than two decades from London-listed equities by the end of 2023 as the cost of living crisis bites, further compounding a flight from the local market.

British retail investors had sold down £11.9bn worth of shares in London-listed companies by the end of October, according to the latest data from the Investment Association, just short of the £12bn in the whole of 2022, which was the largest outflow in 20 years.

Stockbrokers and analysts blame the exodus on a combination of cost of living pressures, higher mortgage rates and the poor performance of the UK equity markets relative to the US and to fixed-income products.

The FTSE 100 index is up just 2.1 per cent since the start of the year, while the S&P 500 in the US was up 25 per cent by midday on December 28.

“Investors have thought twice about investing this year,” said Richard Flynn, managing director of brokerage Charles Schwab UK. “We’ve seen evidence of clients taking money out to meet short-term needs this year. There’s been an element of a retreat to safety, look at immediate needs rather than long-term goals.”

In a survey by the brokerage earlier this year more than half of those surveyed said they were scaling back their investment plans due to the cost of living, with younger investors especially nervous about cost and performance.

Wealth and asset managers said their clients were increasing cash withdrawals from their platforms to meet their financial needs. “Platforms have also reported increased withdrawals as investors take out money. I suspect this trend will continue into 2024,” said Holly Mackay, founder of consumer finance website Boring Money.

More than a third of respondents to the Charles Schwab survey said the biggest reason for pulling money off the platform was to pay bills, with…