Britain Becomes Least Appealing Market as Economy Struggles

In the aftermath of Rachel Reeves's Budget, Britain has emerged as the world's least desired market for investment. A survey of global fund managers found that not only was Britain the least attractive nation to invest in, but it also lagged behind bonds, cash, energy, and utilities.

According to Bank of America's monthly survey of fund managers, sentiment towards Britain has now reached an 11-month low. Elyas Galou, an investment banker, attributed this to the nation's sluggish economy and persistent inflation. He stated, "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 0.1% in the final quarter of 2024. The private sector contracted, but surging government spending was enough to prevent GDP from declining. Business investment has collapsed after the implementation of the Budget, which included a £25 billion 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 consumers.

Mr. Galou noted, "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."

Bank of America's findings bode ill for the government's hopes of attracting investment to Britain. The Chancellor hopes to draw in more foreign money with the intention of stimulating long-term economic growth. Ms. Reeves traveled to China last month to rebuild relations, and the government has reopened trade negotiations with India.

While fund managers shun Britain, they are flocking to the US and becoming increasingly positive about the Eurozone. "UK equity funds have lost nearly half of their assets under management since 2016, the year of Brexit," Mr. Galou explained. "That is $129 billion in outflows; for European funds, the same stat is 40%, which includes the UK, so the UK has driven the exit out of Europe. At the same time, US equity funds have had $1.1 trillion of inflows."