As investors abandon UK stocks, fund flows fell precipitously in July

Despite geopolitical challenges, investors kept putting money into the market in July; however, the rest of the year may see a rise in pessimism

Despite pumping 278 million into funds in July, investors sold billions of pounds' worth of stocks due to both domestic political unpredictability and international volatility.

According to the most recent data from the Investment Association, an industry organization that represents investment managers in the UK, fund flows narrowly remained positive despite some investors being alarmed.

Despite the fact that more money was invested than cashed out in July, investors were generally optimistic; however, the figures show a significant decline from the 3.6 billion inflow in June.

Due to the ongoing conflict between the US and Iran, investors in particular kept selling off their stocks in July, with outflows of £2.1 billion.

Watch the entire video here: Retail investors withdrew a total of 1.6 billion from British stocks in July, the highest amount since January 2025, resulting in the largest fund outflows in the UK. Across all asset classes, net outflows from the UK totaled 1.3 billion.

This was probably caused by domestic political unpredictability following Andy Burnham's removal of Keir Starmer as prime minister, which made investors more wary while they awaited the new premier's plans for the nation.

In July, net flows for the asset class reached 863 million, marking the fourth consecutive month of inflows, as more retail investors shifted to fixed income despite the decline in popularity of equities due to domestic and international uncertainty.

"As domestic and geopolitical uncertainty grows, July saw modest net retail sales of 278 million and a six-month low for gross sales at 30.1 billion, a sharp decline to the inflows experienced in H1," stated Miranda Seath, director of market insight and fund sectors at the Investment Association.

"The composition of flows indicates a more cautious positioning, with investors moving away from stocks and continuing to favor fixed income and mixed asset funds.

"This month's data indicates that many investors are remaining selective and continuing to seek diversified, lower-cost exposure along with more defensive allocations, even though July's uncertainty has resulted in muted flows."

In July, what did Brits invest in?

Fixed income was the asset class with the biggest inflows in July, with 863 million invested.

The most popular fixed income investment was government bonds (333 million), which were followed by specialty bonds (122 million), mixed bonds (181 million), and strategic bonds (319 million).

Money markets (206 million) and miscellaneous other investments (589 million) were the next largest inflows, with 733 million going to mixed asset investments.

Conversely, equities saw the largest outflows of 2.1 billion, while property saw smaller outflows of 0.05 million.

British retail investors continued to make investments in America while selling their holdings back home.

In July, British investors contributed 192 million to North America funds, which saw the biggest retail inflows. European funds (23 million) and global funds (50 million) came next.

With a staggering 1.6 billion removed from British funds, UK funds experienced the biggest withdrawals. Seath proposed that the political unpredictability in Britain was the cause of the outflows.

"In order to make informed investment decisions based on the direction of economic, tax, and investment policy, investors will be anticipating the new government's first Autumn Budget and the upcoming 10-year plan for Britain, especially in light of renewed inflationary pressure further tightening the UK's fiscal headroom."

With 97 million, Asia funds had the second-highest overall outflows, followed by Japan funds with 81 million.

Will net inflows become net outflows?

Despite geopolitical challenges, investor sentiment has been positive thus far this year, with net flows not going negative for the entirety of 2026. However, how long will this optimism last?

The answer appears to be "not for long," as the Boring Moneys index shows a sharp decline in investor confidence in August.

After an optimistic June and July, investors grew more pessimistic about the UK and global economy, causing the index to drop 12% from 52 to 46 in August.

According to the research, 29% of investors say they intend to shift more investments into cash over the next six months, suggesting that more money may be removed from the stock market in the remaining months of 2026.

The CEO of Boring Money, Holly Mackay, stated: "June and July were good months because investors responded favorably to the memo of understanding ending the Iran conflict, and Burnham had a short honeymoon period closer to home. However, August's data reveals a less optimistic outlook, with investors reporting plans to shift more to cash and make fewer investments, as well as lower confidence in both local and global economies.

Investors are much more pessimistic than they were in the summer due to ongoing geopolitical unrest, rising energy costs, early considerations of the October Budget, and anticipated tax increases combined with impending higher interest rates."