Investors are buying British as confidence returns

The recovering economy has made Britons become more confident about UK companies. Research suggests they've been boosting their portfolios with shares of successful companies such as Rolls-Royce and Sainsbury's, while fleeing from the continuing risks from areas such as the eurozone.

A Lloyds Bank Private Banking survey published today reveals that UK assets now account for 73 per cent of Britons' investment portfolios, up from 62 per cent a year ago. Meanwhile, the average eurozone holding has dropped from 11 per cent to 8 per cent.

Ashish Misra, head of investment policy at the bank, said: "Britain's bumpy road to economic recovery has smoothed in recent weeks and while the economy might still hit a few potholes in the coming months, the current signs of improvement have been welcomed by private investors."

Two out of five investors believe the outlook is better than it was six months ago. The shift into British investments coincides with an increase in the number of wealthy investors who say their portfolios are not well diversified – 23 per cent compared with only 17 per cent a year ago.

That's a problem, warns Mr Misra. "It is important that investors remember fundamental principles such as diversification, and to not become overly dependent on the UK economy."

House price inflation, particularly in wealthy areas of London and the South East, may have made the problem worse as investors become more exposed to the UK property and stock markets.