Since the national vote to leave the European Union, UK listed equities have suffered cumulative net outflows of $160bn (£121bn), according to data from Morningstar.
The report looked at a decade of UK market performance and the prospects for the next 10 years, reporting data up until 31 March of 2026. It identified a collapse in global benchmark weight, and widespread fund closures, signalling a “structural loss of relevance” rather than a short-term cyclical drawdown.
UK allocations were systematically redeployed to the US in this decade, while passive strategies gained share as active UK equity economics deteriorated. According to Morningstar, the result is a market that is “under-owned, under-researched, and heavily benchmark-driven.”
Since 2020, there has been six consecutive years of net outflows from UK equities.
Henry Ince, analyst for manager research at Morningstar, says: “Brexit didn’t create the UK market’s structural problems, but it arrived at a moment when investor confidence was already fragile and accelerated capital flight. Flows into UK equity funds came under pressure following the referendum.
“Persistent outflows and shrinking allocations have also had an impact on UK-focused asset managers.”
The report also acknowledged that the UK equity market entered into the 2016 referendum with pre-existing structural headwinds, including declining domestic pension demand, capital rotating toward US growth markets, and an unfavourable sector mix.
There has also been macro factors hitting the UK market since the 2016 vote, notably the Covid-19 pandemic and resulting inflation.
However, the report also claimed Brexit amplified and accelerated these trends, increasing the UK’s perceived risk premium and damaging confidence at a critical moment.
The UK formally left the EU in January 2020.
Since 2022, UK equities have actually outperformed US and global markets, driven by a strong value rotation and resilient dividends, yet without meaningful multiple expansion, according to Morningstar.
The UK trades at a 30 per cent to 35 per cent price to earnings discount compared to the US, with small and mid-caps the most depressed, relative to history and developed peers.
