The FTSE Is Up, So Why Are UK Investors Pulling Out Billions?

UK investors are pulling money out of the stock market at the highest level ever recorded for a calendar year, according to EPFR data published by the Financial Times.

So far in 2025, according to the data, more than £26 billion has been pulled from London-listed equities, despite the FTSE having a great year.

It’s a weird one; the FTSE has gone up more than 16% this year, which is more than the S&P500, which is up 12.6% and the Europe600 Index, which is up 10.7%. (FT) You’d think this would cause an influx of capital and trust, but investors are actually heading in the opposite direction.

Fears Rise Before The Budget

It seems like ever since Rachel Reeves announced the budget on the 26th November, UK tax residents, companies and investors have all felt an air of anxiety.

It’s no secret that the government needs to raise money to fill the ‘black hole’ in UK finances. And whilst they did recent rule out increasing income tax, there has been a lot of speculation around whether capital gains tax, pension allowances and the tax-free pension sum could come in the firing line.

These fears have had a real economic impact. UK investors pulled out £3.4bn from London-listed stocks in October alone, making it the highest monthly outflow of the year.

Global Uncertainty And Fears Around A ‘Bubble’

Another layer to add to the mix is worries about an AI bubble that is about to ‘burst’. The sector, which is largely held up by companies like Nvidia and Meta, is thought by many to be wildly overpriced. But despite this, the stocks keep going up.

So much so, that Michael Burry (of the Big Short) has warned of a bubble, and more than £750bn has been wiped from the market after sharp sell-offs. At a time when inflation is still relatively high, it’s interesting that investors are choosing to sell.

Is The AI Bubble Helping The FTSE Out?

There is some evidence that these fears of a US AI bubble are stronger than those related to the upcoming budget, especially for international investors.

According to Proactive Investors, American investors have channelled more than $15 billion into UK shares this year. However it’s debatable whether they are actually betting on the UK, or just trying to diversify away from the US.

UK Isn’t Just Losing Investors, It’s Losing Startups

But the problem for the UK isn’t just that it is losing investors, but UK startups are opting to list their companies abroad too.

As reported by TechRound, a new Virgin Media O2 report says 1 in 5 of the UK’s fastest-growing companies could leave the country within the next 3 years unless the government acts. The report found that while 85% of startups want to keep their base in Britain, 20% might relocate if conditions do not improve.

Additionally, many entrepreneurs are agreeing that the London Stock Exchange is losing its appeal for startups. After Swedish buy-now-pay-later startup Klarna announced it was going to IPO on the New York Stock Exchange instead of London, Barney Hussey-Yeo, founder of Cleo, shared with TechRound that “For many on Wall Street, the idea of a UK tech champion choosing the London Stock Exchange is almost unthinkable. That should worry us all.”

Can The Government Bring Investors Back?

For investors and businesses, the budget on the 26th November will bring a new financial landscape to navigate. However, aside from just raising taxes, the UK government also needs to rebuild confidence in UK markets.

As the FTSE pushes to record highs, the challenge will not just be driving more investment into the UK, but retaining it.

So, how will the budget affect the markets? We wait and see.