‘Budget uncertainty’ sparks ￡1.1bn withdrawals at City fund giant
One of the UK’s top asset managers has blamed fears of a tax raid in Rachel Reeves’s upcoming Budget for sparking withdrawals of ￡1.1bn from its funds.
Liontrust Asset Management has become the latest company to criticise the Government for knocking investor confidence by raising the prospect of significant tax changes.
The business said it had suffered net outflows of more than a billion pounds in the last three months amid growing concerns around the Oct 30 fiscal event.
John Ions, Liontrust’s chief executive, said: “The new Government’s large electoral mandate raised expectations of political and economic stability and a strong pro-growth agenda.
“The speculation and uncertainty around changes to taxation and reliefs in the lead up to the Budget on 30 October, however, have impacted investor confidence and fund flows for the whole industry including Liontrust.”
The assessment follows surveys reporting plunging business and consumer confidence as the Chancellor prepares to raise taxes.
Ms Reeves has said increases will be necessary to address what she claims is a ￡22bn black hole in public finances. The Chancellor has also vowed no return to austerity and the Institute of Fiscal Studies has warned that fulfilling this promise may require as much as ￡25bn of tax rises.
Sir Keir Starmer has warned that those with the “broadest shoulders” will need to bear the largest burden, suggesting the wealthy will have to help fund the shortfall through higher taxes. Increases in capital gains and inheritance tax are widely expected.
Wealthy investors, executives and business-owners have been scrambling to adjust their finances ahead of any changes. Executives have sold more than ￡1bn of shares in companies they work at since the general election was called and wealthy entrepreneurs such as Pimlico Plumbers founder Charlie Mullins have vowed to quit Britain.
As well as concerns about tax changes, business leaders have raised concerns that ministers may be talking Britain into a downturn by focusing on the dire state of public finances and the pain involved in fixing it.
Consumer confidence plunged by seven points last month, as measured by GfK, and the sharp falls in business confidence across a number of surveys.
Rain Newton-Smith, boss of the Confederation of British Industry, has said businesses want leaders “talking up the UK’s status as a place to live, work and do business”.
Liontrust’s assets under management shrunk by 4pc to ￡26bn during the three months ending in September, with UK retail funds overwhelmingly behind the decline.
The latest surge in withdrawals from Liontrust comes after a bruising financial year, with net outflows of ￡6.1bn in the twelve months to March. It attributed that decline to core investment strategies, such as betting on quality growth, small and mid-caps and UK equities, falling “out of favour” with investors.