Conservative win still fuelling UK investment 1 month later

January 14, 2020

Investments

The Conservative win is still fuelling UK investment one month later

The last four years following the UK´s European Union referendum have shared a similar theme: uncertainty and turbulence. However, the Conservative win might be about to change that.

However, the UK entered 2020 with Boris Johnson at the helm of Downing Street, widespread support for his Brexit withdrawal agreement and a huge majority of Conservative seats in parliament which brought a wave of increased confidence and stability in the British public and overseas investors.

In December, shortly after the Conservative Party´s general election win, investors put a total of £1bn into open-ended UK equity funds with the hope that the UK´s stocks and markets would successfully rebound to profitable levels.

Data from fund settlement service, Calastone, shows the influx of funding into UK-focused funds which hit a two-year high last month. £2bn worth of investment flowed into the sector, resulting in the fifth-best month on record and twice the previous monthly record set in July 2015.

UK equity funds received more than £330m in the two days after the election´s results were announced, and more than £740m in the following 13 trading days after that.

The FTSE 250 jump by 3.4 per cent on the day of the result, while smaller, British investment trusts saw share prices grow by 5-7 per cent on average during the same month. Increased investor demand also narrowed the gaps between share prices and asset values to 4 per cent: around half of their usual level.

According to Investment Association data, retail investors also gained £13.7bn from equity funds in the years following the UK´s decision to leave the European Union.

“December proved just how powerful the influence of politics is over investor activity,” said Edward Glyn, head of global markets at Calastone.

“’Regardless of the relative merits of Brexit or remaining in the EU, an end to the UK’s political deadlock and a clearer path for the country (at least in the short term) is unleashing enormous pent-up demand for UK equities in particular, whose performance has lagged far behind their peers elsewhere in the world.”

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