£1bn shares sold by nervous small investors

NERVOUS investors staged a ‘buyers’ strike’ ahead of the General Election after pulling a record amount of nearly £1billion out of UK investment funds in March.

The prospect of the most unpredictable election in living memory has proved too much to stomach for many savers.

The Investment Association trade body says UK equity funds – which typically invest in big British companies – saw the largest ever net outflow of £963million in March.

This smashes the previous record of £558million, which came during the financial crisis in January 2008, months after the run on Northern Rock. Investors usually pile in to funds in March to use up their tax-free Isa allowance before the end of the financial year.

Last night experts blamed the huge withdrawals on pre-election jitters. Laith Khalaf, senior analyst at pensions and investment firm Hargreaves Lansdown, said: ‘Private investors are staging a buyers’ strike in the lead-up to the election.

‘This is pretty par for the course when it comes to the uncertainty created by a big political event, and the Footsie reaching a record high won’t have helped matters.’

The FTSE 100 index of the leading UK bluechip firms hit an all-time high in March, crashing through the psychological barrier of ,000 points for the first time. Recently it has fallen below ,000, closing at 6960.63 yesterday.

Investors tend to cash shares in ahead of elections as they hate uncertainty. But the stakes are particularly high at this election. More than 150 business leaders have signed a letter backing the Tories’ economic plans and ‘warning against a change of course’. Labour’s manifesto pledges to increase corporation tax, freeze energy prices and increase bank taxes have spooked the City. But many businesses are also nervous about the Tories’ promise to hold a referendum on the UK’s membership of the EU by 201 .

Last week, HSBC said it could move its HQ abroad over concerns about taxes, tougher rules and the threat of Britain leaving the EU.

But some experts believe investors are taking their money from UK funds because they think the shares are overvalued.