May 6, 2026
Nearly a decade after British voters decided to exit the European Union on 23 June 2016, the FTSE 100 has been touching new peaks. However, beneath the surface, the financial wounds from that referendum remain clear, according to a fresh Morningstar study called ‘The Brexit Decade’.
Since the vote, UK equity funds have seen roughly $160 billion in cumulative net withdrawals, marking six straight years of redemptions that have turned into a lasting erosion of trust rather than a mere cyclical dip.
How large is the performance gap between UK stocks and comparable equity markets since the referendum? And what has happened to the pound? The figures are telling.
The FTSE 100, which tracks the 100 biggest firms listed on the London Stock Exchange, has climbed 62% since Brexit. Over a decade, that equates to a compounded annual growth rate of just under 5%. In contrast, the S&P 500 has jumped 253% over the same period, an annualised return of 13.4% — nearly three times the pace of UK large-cap stocks.
The disparity is not only transatlantic. Within Europe, the German DAX has delivered 151% and the Euro STOXX 50 has risen 109%, suggesting Brexit has hit London harder than its continental peers.
Morningstar sees Brexit as a trigger rather than the fundamental cause of UK market weakness. The UK equity market entered the 2016 vote with existing structural challenges: falling domestic pension demand, capital rotating toward US growth markets, and a sector mix heavy on energy, banks, and miners rather than the tech platforms that led the 2010s. Brexit magnified and sped up these forces, raising the UK’s perceived risk premium and undermining confidence at a crucial time.
Investor actions have been clear. UK allocations were steadily moved to the US, while passive strategies gained as active UK equity economics worsened. The UK’s share of global benchmarks has roughly halved over two decades, sliding from nearly 10% of the MSCI ACWI to about 4% now. In the most aggressive sterling-allocation fund category tracked by Morningstar, average UK equity weights have dropped from 40% to 18%, with the freed capital redirected to US stocks.
The asset management sector has felt the chill directly. Around 380 UK equity strategies have shut since 2016 versus just over 200 launches, and the portion of total assets in passive UK equity vehicles has risen from 22% to 46% over the same span. Active large-cap managers such as Columbia Threadneedle, Jupiter, Liontrust, Aviva, and Schroders have faced the biggest outflows, while Vanguard, iShares, and Phoenix Group have seen inflows.
The damage was then worsened by Covid-19, the global inflation surge, geopolitical strife, falling foreign direct investment, weaker goods exports, and domestic policy errors — especially the gilt market crisis of autumn 2022. Morningstar admits that isolating Brexit’s effect is challenging but says there is no credible argument that it did not materially make outcomes worse.
The currency market shows a similar pattern. The pound has dropped about 10% versus the US dollar and 12% against the euro since the Brexit vote. On the eve of the referendum, one pound bought EUR1.31. Nearly a decade later, it buys EUR1.15 — a roughly 12% loss of buying power against the single currency the UK chose to leave. Sterling has fallen over 20% against the Czech koruna and 13% against the Polish zloty, both economies that have taken in manufacturing capacity and foreign direct investment that might have gone to the UK. The pound has barely held its ground against the Hungarian forint, managing a 1.8% gain.
The story is no longer one-sided. Since 2022, UK equities have outperformed US and global markets, driven by a strong value rotation and steady dividends — but without significant multiple expansion, per Morningstar. Valuations still reflect gloom. The UK trades at a 30% to 35% price-to-earnings discount to the US, with small and mid-caps the most beaten down relative to history and developed peers. High mergers and acquisitions activity and record share buybacks suggest corporate insiders and foreign buyers see value where public investors remain wary.
Some fund managers see this as a buying opportunity. Natalie Bell, a fund manager on the Liontrust Economic Advantage team, has said that valuations remain significantly depressed versus long-run averages and other comparable markets, and her team sees a broad-based valuation reversion chance for UK equities, especially in small and micro-caps, even if timing and size are hard to predict. Others are more cautious. Mislav Matejka, head of global and European equity strategy at JP Morgan, has argued that British equities often do well when investors turn bearish on everything else, given the FTSE 100’s defensive, liquid nature. He expects the UK index to rise 5% to 10% in 2026 but does not hold an overweight, believing the UK lacks a clear growth catalyst like those emerging in Germany or China.
Ten years after the vote, the question for international investors is no longer whether Brexit damaged UK markets — it is whether the resulting discount has now become the opportunity.