Investors pulled a record £1.2 billion (€1.33 billion) from UK equity funds between June and August as the likelihood increased of trade talks between the EU and the UK collapsing.

The dramatic fall in confidence in the UK economy adds to the pain caused by the UK’s position at the bottom of the OECD economic performance league since lockdown.

According to data from Calastone’s monthly fund flow index UK equity funds saw their worst three months of outflows on record over the summer as a combination of the pandemic and Brexit caused investors to shun UK assets.

By contrast, collectively all non-UK equity funds enjoyed unusually strong inflows over the same period.

In August, European equity funds saw their first inflows in two years as investors were attracted to cheap share prices that don’t come with UK-risk.

Edward Glyn, head of global markets at Calastone, said: “Not content with the economic storm caused by the pandemic, the prospect of a no-deal Brexit is once again clouding the outlook for the UK too. This is prompting investors to dump their UK holdings and switch to markets showing greater Covid-19 resilience and that don’t face Britain’s bespoke Brexit risks.

“On the face of it, the inflow to European funds seems strange given rising infection rates but European equities are relatively cheap compared to their record-priced US counterparts and the dollar is in decline.”