ETFWorld: The UK ETF market closed the first half of 2026 inside a European inflow cycle without precedent.
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Article created by the editorial staff of ETFWorld.co.uk
Original analysis and summary by ETFWorld based on publicly available data; reproduction prohibited.
European ETFs and ETPs raised more in six months than in any previous half-year. In Britain, ETFs continued to gain ground on conventional index funds, while the reclassification of crypto ETNs narrowed retail access.
Morningstar data show that Europe-domiciled ETFs and ETCs took in €219bn of net new money in the six months to June, the highest figure in the series, with assets reaching €3.23trn at the end of the period. ETFGI, which reports in dollars and covers a wider product perimeter, records $265.65bn of net inflows and $3.74trn of assets under management over the same period. In the UK, ETF flows tracked by LSEG Lipper stayed positive through the first five months of the year, while conventional index funds alternated between heavy inflow and heavy redemption months. The half-year was shaped by the energy shock tied to the Middle East conflict, by a Bank of England that held Bank Rate at 3.75% throughout, and by new tax rules that from 6 April confined crypto ETNs to the Innovative Finance ISA.
Europe: the strongest half-year on record
The $265.65bn recorded by ETFGI exceeds the previous best for the period, $176.09bn in 2025. The third-highest figure remains 2021, at $111.95bn. June alone brought $44.74bn of net inflows into European-listed ETFs and ETPs, the forty-fifth consecutive positive month.
Demand was concentrated in equities. Equity ETFs gathered $182.77bn year to date, against $120.65bn in the same period of 2025, and account for roughly 69% of half-year inflows. Bond ETFs attracted $54.20bn, against $32.69bn a year earlier, or about 20% of the total. Commodities remained marginal at $3.04bn year to date, below the $7.05bn of H1 2025, and closed June with $1.04bn of outflows.
European assets rose 16.1% since the start of the year, from $3.22trn at the end of 2025 to $3.74trn at the end of June. Slightly more than half of that increase came from net inflows, the remainder from market and currency movements. The June figure was down on the record $3.77trn recorded at the end of May, a decline driven by market performance and by the euro’s weakness against the dollar.
The figures reported by different providers do not match because perimeter, currency and methodology differ. Morningstar includes ETCs alongside ETFs and reports in euros. ETFGI covers the full ETF and ETP universe in dollars. LSEG Lipper, which measures ETFs only, reported €39.5bn of net inflows in June and European assets at a record €3,099.5bn. HANetf, in its July report, puts total European ETP assets above $3.8trn, with ETFs at $3.6trn after $133.8bn of second-quarter inflows. Adjusted for currency, the four datasets describe the same trend.
The UK: ETFs gain ground on conventional index funds
The LSEG Lipper UK sample shows a half-year in which the ETF structure took share from unlisted index funds, though not on a steady path.
January flows into funds sold in the UK were negative overall, at £3.89bn of net redemptions. ETFs took in £1.78bn over the month, while passive mutual funds shed £6.45bn. The gap was widest in fixed income: bond ETFs gathered £1.09bn as their unlisted tracker peers lost £4.49bn.
February brought £1.1bn to ETFs, split between £568m in equities and £535m in bonds, while passive mutual funds returned to positive territory at £2.65bn. April saw £4.86bn go into passive vehicles overall, of which £1.84bn through ETFs. May reversed the split: passive mutual funds took £6.47bn against £768m for ETFs, with equity ETFs marginally negative at £21m of outflows and bond ETFs positive at £704m.
The year-to-date position at the end of May shows £13.77bn raised by passive products, of which £9.33bn went to index mutual funds and £4.45bn to ETFs. Within the ETF figure, bonds contributed £2.50bn, equities £1.17bn, money market products £363m and commodities £193m.
One point should be flagged for transparency. Adding the known months — January, February, April and May — gives roughly £5.49bn, against a year-to-date total of £4.45bn at the end of May. The difference implies that March was the only month in negative territory, with around £1bn of redemptions. The official March figure was not verified directly, so this should be treated as an estimate derived by subtraction.
The perimeter of these numbers is funds and ETFs distributed in the UK as tracked by LSEG Lipper. It is not the far larger universe of ETFs listed on the London Stock Exchange, whose assets and flows are predominantly cross-border.
UK equities: redemptions with indices near record levels
The most consistent feature of the half-year was the gap between domestic equity performance and domestic equity flows.
The FTSE 100 closed on 30 June at 10,572.73 points. On 2 January it had closed at 9,951.14, in the session where it passed 10,000 for the first time in intraday trading, with a record intraday high of 10,046.25. Between those two dates the index gained roughly 6% in price terms, having traded close to 11,000 points in February.
Flows moved in the other direction. From the start of the year to the end of May, the Equity UK classification recorded £2.40bn of redemptions, with a further £1.76bn from Equity UK Income and £1.63bn from Equity UK Small & Mid Cap. Only in May did UK equities turn marginally positive, at £111m.
Investors favoured global exposure instead. Equity Global ex UK attracted £4.17bn over the first five months and Equity Global £2.01bn, while Equity Europe ex UK lost £2.71bn, Equity Asia Pacific ex Japan £2.21bn and Equity Japan £1.14bn. The active-to-passive rotation within equities was pronounced: active equity funds shed £14.64bn while passive products took in £8.54bn.
Fixed income: duration returns
May was the decisive month for UK fixed income. Bond funds gathered £5.68bn, the largest monthly figure of the decade according to LSEG Lipper, helped by easing yields. Demand concentrated on global exposure: Bond Global USD attracted £2.94bn in the month and £2.69bn year to date, while Bond GBP Government took £2.05bn on a year-to-date basis. Bond GBP Corporates moved the other way, losing £2.16bn since January, almost entirely through active strategies.
Calastone data, which track transactions in open-ended funds sold in the UK, point to the same rotation. Bond funds took in £1.06bn in June, their third-strongest month on record, while equity funds shed £437m and multi-asset funds gathered £1.97bn. Money market funds returned to positive territory at £215m. Within equities, only the global and North American categories were positive, at £328m and £200m respectively; Asia Pacific recorded its thirty-eighth consecutive month of outflows.
Across the half-year, Calastone reports £2.3bn of inflows into bond funds, almost half of it in June alone. Equity funds had lost £3bn in the first quarter and recovered £389m in the second. 
Edward Glyn, head of global markets at Calastone, said investors remain willing to take risk but have become far more selective about how they do it, and linked the strength of demand for bonds and multi-asset strategies to a search for portfolios that can generate returns while staying resilient if markets turn more volatile.
One April figure helps frame the period. The £1.1bn that flowed into equity funds that month ended ten consecutive months of redemptions running from June 2025, a run without precedent in Calastone’s records.
London as a trading venue: the London Stock Exchange numbers
On the trading side, 2026 began from the strongest base the exchange has recorded. In 2025 the value of ETPs traded on the London Stock Exchange order book reached £238.4bn, up 38% year on year, with a record 11% share of European on-venue trading. Over the same year ETPs accounted for around 19% of the exchange’s total average daily value traded, with 372 new listings.
In January 2026 the London Stock Exchange recorded four of its five highest-ever sessions by ETP value traded, with average daily volume of £1.6bn over the month. The single-session record, £2.6bn on the order book, dates from April 2025.
Active ETFs: the fastest-growing segment in Europe
Actively managed ETFs were the most dynamic product story of the half-year. Morningstar’s Europe Active ETF Trends report puts European assets at €108.3bn at the end of June, close to three times the level at the end of 2023, following €18.8bn of net inflows over the six months. Their share of total European ETF inflows rose to 8.8%, from 7.6% in 2025 and 7.3% in 2024, while their share of assets remains at 3.4% against roughly 12.5% in the United States. Seventy-five new products were launched over the period.
ETFGI figures, on a different perimeter and in dollars, show $26.63bn of year-to-date inflows into active ETFs listed in Europe, against $13.36bn in the same period of 2025. Globally, active ETFs gathered $500.88bn over the six months, compared with $266.48bn a year earlier.
The segment matters directly for London as a listing and distribution venue. Over the half-year Franklin Templeton listed an actively managed US equity income UCITS ETF on the London Stock Exchange, Schroders expanded its European active range, and Royal London Asset Management filed two equity tilt products for registration, one global and one focused on the UK market. State Street, in its 2026 outlook, expects active ETF launches in Europe to exceed all passive launches this year, after overtaking passive equity launches alone in 2025.
Commodities, gold and crypto: the weaker side of the half-year
Commodities closed the period against the wider trend. ETFGI reports $3.04bn of year-to-date inflows into European commodity ETFs, less than half the $7.05bn of H1 2025, with June in outflow. Globally, June redemptions reached $9.91bn, cutting the half-year total to $11.53bn against $41.85bn a year earlier.
World Gold Council data on physically backed gold ETFs show $8bn of positive global flows over the half-year, with Asia driving demand and North America the only region in outflow at $7.7bn, its weakest first half since 2013. Europe recorded positive flows. Global assets still fell 6% over the six months, to $526bn at the end of June, on the back of the metal’s price, including a 13% decline in June alone. In the UK, the same dynamic shows up in the Equity Sector Gold & Precious Metals classification, which shed £640m over the first five months of the year.
Among themes, defence remained one of the few sectors with sustained demand. In the week of 8 to 12 June an aerospace and defence UCITS ETF gathered €427.1m, the largest weekly inflow among European-listed ETFs over that period.
Crypto ETNs and ISAs: the British regulatory question
The most significant regulatory change for the British retail market took effect on 6 April 2026.
In October 2025 the Financial Conduct Authority lifted its four-year ban on retail purchases of crypto ETNs, and HMRC confirmed that the instruments could be held in Stocks and Shares ISAs and registered pension schemes. From 6 April 2026, however, new purchases of crypto ETNs qualify only within the Innovative Finance ISA. Existing holdings do not have to be sold, but new money now passes through a wrapper offered by far fewer managers.
The issue is one of distribution rather than principle. At the end of February 2026 the Financial Times, cited by CoinDesk, reported that none of the 57 platforms then authorised to offer the Innovative Finance ISA had plans to support crypto ETNs. The first operational answer came in April, when Stratiphy secured authorisation as an IFISA manager and announced a partnership with 21Shares. According to the issuer, its products account for more than 40% of the crypto ETN market on the London Stock Exchange, where average daily volumes have run at around £6m since the previous October.
HMRC has said it will keep the position under review, leaving open the option of readmitting crypto ETNs to the Stocks and Shares ISA at a later stage.
ISA reform: what changes from 6 April 2027
The tax framework around British savings is in motion, and the half-year brought further detail.
The Autumn Budget 2025 set out that from 6 April 2027 the annual Cash ISA limit falls from £20,000 to £12,000 for those under 65, while the overall allowance stays at £20,000 and the limit for Stocks and Shares and Innovative Finance ISAs remains £20,000. The Cash ISA limit is unchanged for those aged 65 and over. On 23 June 2026 the government published the technical detail of the anti-circumvention rules: from 2027 uninvested cash held in non-cash ISAs will attract a 22% charge on interest, and transfers from Stocks and Shares or Innovative Finance ISAs into a Cash ISA will be barred for the under-65s.
The 2026/27 tax year, which began on 6 April 2026, still operates under the previous rules. Separately, dividend tax rates rose by two percentage points from April 2026, to 10.75% at the basic rate and 35.75% at the higher rate, with the allowance unchanged at £500.
The Treasury’s stated aim is to move savings out of cash and into investment. For the UK ETF market this is a potential source of structural demand, with effects starting in 2027 and a scale that remains debated within the industry.
The macro backdrop: Bank Rate held at 3.75%
The Bank of England cut Bank Rate to 3.75% in December 2025 and left it there throughout the first half of 2026. In March the Monetary Policy Committee voted unanimously to hold. On 30 April the vote was 8–1, with one member favouring an increase to 4%. On 17 June it was 7–2, with two members voting for a rise. The next decision is scheduled for 30 July.
Consumer price inflation fell to 2.8% in the twelve months to April 2026, from 3.3% in March. The April Monetary Policy Report nonetheless projected CPI at 3.1% in the second quarter and 3.3% in the third, rising somewhat further in the fourth, on the back of energy and food prices. At the June meeting the Committee noted that global energy prices had fallen since the previous meeting following developments in the Middle East, while remaining above pre-conflict levels and volatile.
This sequence explains much of the flow pattern over the half-year: the defensive turn in March, the recovery in risk appetite from April, and the strong demand for duration in May as yields eased.
Concentration: the top five issuers
ETFGI data show that at the end of June the five largest European issuers controlled 75.1% of assets and had captured 66.7% of year-to-date net inflows, or roughly $177bn. iShares held a 39.6% share with $1.48trn in assets, ahead of Amundi ETF (12.5% and $469.4bn), Xtrackers (10.2% and $380.7bn), Vanguard (7.3% and $274.1bn) and UBS ETFs (5.4% and $202.6bn).
The iShares share of assets is down by around 0.8 percentage points from 40.4% at the end of 2025. The fact that the top five take a smaller share of inflows than of assets indicates that part of the capital is moving towards smaller, more specialised providers. At the end of June the European industry comprised 3,902 products, 16,148 listings and 160 issuers, across 32 exchanges in 26 countries.
Among promoters active in the UK market, the LSEG Lipper year-to-date table at the end of May was led by Vanguard with £8.88bn, ahead of HSBC (£6.36bn), Amundi (£3.24bn), Schroders (£2.65bn), JPMorgan (£2.12bn) and Northern Trust (£2.09bn).
Conclusions
The first half of 2026 leaves the UK ETF market with three verifiable points. The first is quantitative: European inflows exceeded any previous half-year, with equities taking roughly two-thirds of the total and bond inflows up more than 60% year on year. The second is structural: active ETFs reached €108.3bn in assets and 8.8% of European inflows while still representing 3.4% of assets, a level that leaves considerable room for expansion relative to the US market. The third is regulatory and specific to Britain: since 6 April, crypto ETNs sit in a tax wrapper that, on the evidence available, almost no retail platform supports.
Two questions remain open for the second half. The first is whether British demand for domestic equities will realign with index performance after a half-year of near-continuous redemptions. The second is whether the ISA reform taking effect in 2027 will deliver the shift from cash to investment the Treasury expects, and how much of it will run through the ETF wrapper. With $265.65bn already raised in Europe over six months, 2026 is on course to exceed the $396.84bn recorded in 2025, absent a reversal in the second half of the year.
Source : ETFWorld.co.uk
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