Net retail sales plummet as investor confidence knocked by political and economic uncertainty

Jessica Clark
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A picture taken 17 April 2007 in London...
UK equity funds were hit the hardest by Brexit uncertainty (Source: Getty)

Investor confidence was knocked by a "perfect storm" of political and economic uncertainty last year sending net retail sales plummeting by 85 per cent.

Brexit, US-China trade tensions, the slide in the Turkish Lira and the Italian budget crisis all impacted investor sentiment last year and saw sales drop to £7.2bn in 2018 in comparison to £48.5bn the previous year.

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UK equity funds were hit the hardest by Brexit uncertainty as the sector saw net retail outflows of £4.9bn, according to the latest Investment Association statistics.

In the 31 months since the EU referendum UK equity funds have experienced outflows of £11.5bn compared to inflows of £5.6bn in the 31 months leading up to the 2016 vote.

The worst-selling Investment Association sector in 2018 was UK All Companies with outflows of £3.9bn, while Global was the best-selling sector, reporting net retail sales of £3.9bn.

Hargreaves Lansdown senior analyst Laith Khalaf said: “Investors are paralysed by the Brexit headlights, and little wonder given proceedings in Westminster and Brussels."

He added: “However difficult it might seem right now, investors should focus on their long term goals, because we will eventually leave Brexit in the rear view mirror.

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“With uncertainty comes opportunity, and if there is an orderly withdrawal from the EU we would expect the exodus from UK equity funds to go into reverse, and some deeply unloved UK domestic stocks to rally.

“That’s far from certain, to say the least, but investors should make sure their portfolio is evenly spread, so all their eggs aren’t in one Brexit basket.”