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Equity funds saw their largest ever withdrawals in October, according to Calastone鈥檚 latest Fund Flow Index. Investors pulled 拢3.63bn from these funds, marking the fifth month in a row of net selling. Between June and October, the total amount withdrawn reached 拢7.36bn, the biggest outflow period on record since Calastone began tracking the data.

Every equity category recorded outflows. UK-focused funds were hit hardest, losing 拢1.22bn in October alone, which accounted for around one third of total withdrawals. Global funds also took a hit, with 拢911m leaving the sector, the fifth month in a row of net selling. North American funds lost 拢649m, their third worst month on record. Technology funds saw a large portion of the 拢220m withdrawn from sector-focused equity funds.

Edward Glyn, Head of Global Markets at Calastone, said two factors were driving investors to pull back from equities – nerves about global share prices and worries about upcoming tax changes under Rachel Reeves鈥檚 budget.

Why Are Investors Turning Away From Equities?

According to Glyn, investors are really cautious about high share prices, especially in the US right now. Many are choosing to take profits and move money into safer areas such as cash and fixed income funds. Inflows into money market funds reached a record 拢955m in October, while fixed income funds gained 拢589m, mostly directed at corporate bonds and flexible funds. Investors avoided sovereign bond funds, showing a very clear preference for lower-risk and more flexible investments.

Tax concerns also influenced the selling trend where some investors have been selling to lock in capital gains before possible tax rises. This is similar to the behaviour seen before the 2025 tax-raising budget, and Calastone believes it may be happening again in anticipation of further tax changes.

How Are Pension Savers Reacting?

The uncertainty around pension rules is adding to the caution. Glyn said many over-55s worry that the tax-free lump sum available from pensions could be reduced or removed. Since this benefit is an important part of retirement planning for many, speculation around policy changes has pushed people to take action sooner rather than later.

Calastone鈥檚 data, which tracks over 85% of UK fund flows, shows that these selling patterns are not driven by surveys or sentiment but by actual investor trading activity. This gives a clear picture of where investors are placing their money, and in October that meant a record move away from equities towards safety.

How Does This Impact Startups?

Experts have shared how this investment pull could mean for UK startups…

Our Experts:

• Tevin Tobun, CEO, Routd
• Max Linnington, Co-Founder, EPSMomentum
• James Barnes, Co-Founder, StatusCake
• Neil Shah, Executive Director and Market Strategist, Edison Group
• Lewis Crompton, Founder and CEO, STARTrading
• Martin Robinson, Director, Amzonite

Tevin Tobun, CEO, Routd

“Through my experience scaling Routd, our AI tech logistics platform, we know that startups and businesses looking to scale often rely on venture capital, angel investment, or even institutional backing. Whilst this money is largely being pulled from stock market equities, it鈥檚 the sentiment it creates in the market that can have an impact. If investors are reducing exposure to what they perceive as higher-risk assets, such as tech or growth companies, and becoming more risk-averse, this could spill over into private markets.

“It also means valuations may fall, and investors could demand stronger proof of business metrics before investing. We are confident that Routd has clear revenue and profitability paths, as well as strong fundamentals, but more speculative tech businesses could find raising investment harder.

“Ultimately, businesses need to ensure their fundraising strategy is realistic and that they are emphasising fundamentals such as revenue growth, customer traction, and cost discipline to attract whatever investment is available.”

Max Linnington, Co-Founder, EPSMomentum

“The UK startup sector is growing increasingly anxious about the upcoming Winter Budget in November 2026, especially as a record 拢7.3 billion was withdrawn from UK equity funds in the four months through October 2025. This wave of outflows, the largest on record, has heightened concerns that future funding for startups will be harder to secure.
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“Markets typically dislike uncertainty, and the pending budget has led many professional investors to reconsider their strategies, crystallize gains, and reduce UK equity exposure to mitigate risk. Such a retreat has clear ripple effects: lower equity valuations can delay or worsen IPO conditions, slowing both private equity deployment and venture capital funding for new and growing businesses.鈥�

“Recent US history, specifically 鈥淟iberation Day鈥� in April 2025, underscores how policy uncertainty can trigger significant market corrections and tighten startup funding. The S&P 500 dropped 12% and the Russell 2000 nearly 20% within days of new trade tariffs, leading to a sharp pullback in VC activity鈥攆rom $91.5 billion in Q1 to $70 billion in Q2. While funding for AI and other critical sectors stayed strong, overall activity only began to recover as uncertainty cleared, with Q3 VC funding nearly $81 billion.

“For UK founders, the current climate justifies caution, but history suggests that once budget details are clarified, capital may flow again鈥攅specially to startups in vital or fast-growing sectors.”

James Barnes, Co-Founder, StatusCake

“The record outflows from UK equities mainly reflect a shift in asset classes; for instance investors moving toward bonds and cash as sentiment tightens. Whilst that matters for fundraising at the margins, but it doesn鈥檛 change much for private startups.

“I suspect many founders, like me, have pre-budget fatigue. The government has floated dozens of Budget ideas, so there鈥檚 no point speculating.

“Between now and the 26th of November, founders are better off focusing their time on what they can control 鈥� customers, product, and cashflow.”

Neil Shah, Executive Director and Market Strategist, Edison Group

鈥淭his is likely to be a short-term issue. As with previous budgets, they are preceded by uncertainty and speculation, but once this is removed, activity often bounces back. Volatility and uncertainty are never helpful for funding, as the perception of higher risk drives down valuations and increases dilution, often closing the funding windows for many companies.

The government could better support the SME sector by providing a stable, clear agenda. The black hole created by the OBR revisions should have been anticipated, as these are regular occurrences. Greater fiscal headroom and the conviction to carry out some of the proposed spending cuts would have avoided the current situation.鈥�

Lewis Crompton, Founder and CEO, STARTrading

“When investors pull over 拢7 billion from the UK stock market, it sends a clear message that confidence is cracking. That kind of capital removal doesn鈥檛 just hit the FTSE companies, it ripples straight down into the startup ecosystem. When big money gets nervous, risk appetite disappears. Meaning VCs tighten the purse strings, angels hold off, and early-stage founders suddenly find that raising cash feels like pulling teeth and so many will stop, or not even bother to start. What a shame for the UK economy.

“For UK startups, this means two things: first, funding rounds will take longer and valuations will likely drop. Second, those who can show real revenue, discipline, and a clear path to profitability will actually stand out more than ever. The market is shifting from hype to fundamentals. Signalling potential bubble bursting of sectors like AI. If you鈥檙e building right now, don鈥檛 panic just adapt. Focus on cash flow and clarity of mission and messaging. The investors who stay in will be hunting for businesses that can thrive through the turbulence.”

Martin Robinson, Director, Amzonite

“The record comes from UK equity markets ahead of the Winter Budget highlighting a clear move in investor attitude. Many investors tend to re-evaluate exposure to domestic risk assets, particularly when policy direction and tax implications are in question.

“For UK startups, this can present both challenges and potential openings. Tighter liquidity conditions and a cautious investor base can make early stage fundraising more challenging, especially for ventures dependent on public market confidence to support valuations or exit opportunities. But market volatility often refocuses attention on innovation, efficiency, and long-term value creation.

“Institutional and private capital may look toward sectors with structural growth potential as part of a broader strategy. Startups positioned within these sectors could still attract investment, even as overall market sentiment softens.

“A supportive policy stance, clear signals, and continued emphasis on innovation funding will be key to ensuring that the UK鈥檚 entrepreneurial ecosystem remains globally competitive in a period of economic adjustment.”