Businesses that earn most of their profits abroad have benefited since the Brexit vote from an inflow of funds from investors at the expense of domestic companies that rely on sales in the UK, according to two separate analyses of the London stock market.

In the two years since the EU referendum, the disparity between the share performances of companies that operate largely inside the UK and ones that repatriate profits from foreign subsidiaries has almost reached a record high, said the accountancy company KPMG.

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The trend has left the UK stock market lagging behind US and continental markets, which have soared in the past two years. Investors have pushed the FTSE 100 to a record high but the index is still only a few hundred points above its 1999 peak, while the Dow Jones is at 24,580 – more than double the level at the turn of the century.

KPMG’s latest FTSE Brexit insight analysis, which tracks companies from the FTSE 250 and FTSE 100, found investors favoured businesses that benefited from the weakness of the pound, which is down 11% against a basket of currencies since the Brexit vote.

KPMG said it put companies that earn more than 70% of their revenues from abroad in a non-UK 50 index and compared it with 50 businesses that derive more than 70% of their revenues from the UK.

Yael Selfin, the KPMG chief economist, said the UK 50 is 4% below its level prior to the referendum, while the non-UK 50 has gained 35% over the same period.

“The outlook for the next year may be more mixed. While the pound is expected to remain relatively weak, the prospect of an escalating trade war could hurt a significant proportion of our FTSE non-UK 50 constituents,” she said.

“These companies are also potentially more vulnerable to a cliff-edge Brexit as they tend to have supply chains that are more deeply integrated with the EU.”

Laith Khalaf, a senior analyst at the stockbroker Hargreaves Lansdown, said the biggest impact was on the retail sector.

“The retail sector has come under pressure from higher labour costs, lower footfall and the relentless rise of digital shopping. The currency crunch didn’t cause these issues but it made life more difficult in already tough times for high street retail,” he said.

“The best performing stocks since the Brexit vote have a distinctly metallic tint and that’s because mining companies have profited from a combination of lower sterling and higher commodity prices.”



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More broadly, UK investors have tended to buy shares in continental stock markets and New York.

“Investors have been putting record amounts into funds of late but they have been pulling considerable chunks of money out of the UK. Since the EU referendum was announced, £7.9bn has been withdrawn from UK equity funds against a backdrop of £61bn being ploughed into investment funds more generally,” Khalaf said.

“Particular flashpoints for withdrawals from UK equities occurred around the time of the referendum and the general election the following year, which suggests the investor exodus from the UK has been very much driven by political uncertainty.”