Investors bet against Starmer’s Britain as economy falters

Britain has become the most unloved market in the world as the economy struggles in the wake of Rachel Reeves’s Budget.

Daily Telegraph

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A survey of global fund managers found Britain was not only the least attractive nation to invest in, but was also less popular than bonds, cash, energy and utilities.

Sentiment towards Britain is now at an 11-month low, according to Bank of America’s monthly survey of fund managers.

Elyas Galou at the investment bank said Britain’s stagnant economy and stubborn inflation problem were to blame.

He said: “The UK is the living definition of stagflation. On the one hand you have subdued growth, which is related to very low productivity, and the other big reason is inflation.”

The UK economy grew by just 0.1pc in the final quarter of 2024. The private sector shrank but surging government spending proved just enough to stop GDP from contracting.

Business investment has collapsed in the wake of the Budget, which included a £25bn raid on employers’ National Insurance contributions. Corporate confidence has also plummeted amid warnings that the Budget will lead to job losses and higher costs for customers.

Mr Galou said: “When I speak to investors I often ask when was the last time you heard some positive news about the UK, and they struggle to answer. It is a growth problem.”

Bank of America’s findings bode ill for the Government’s hopes to boost investment into Britain.

The Chancellor wants to attract more overseas cash with the hope of lifting long-term economic growth. Ms Reeves went on a junket to China last month to rebuild relations and the Government has relaunched trade deal talks with India.

While fund managers are shunning Britain, they are flooding into the US and are increasingly positive on the eurozone.

“UK equity funds have lost nearly half of their assets under management since 2016, the year of Brexit. That is $129bn of outflows. For European funds the same stat is 40pc – this includes the UK, so the UK has driven the exit out of Europe,” Mr Galou said.

“At the same time, US equity funds have had $1.1 trillion of inflows. You see this massive rotation into the US, out of the rest of the world, out of Europe, and in particular out of the UK.”