One of the world’s most prominent hedge fund investors, Ray Dalio, has warned that the UK is stuck in a “doom loop” as it faces a worrying mix of higher taxes, rising debts and slower growth.
Dalio, a US billionaire who founded the hedge fund Bridgewater Associates in 1975, said warning signs over the size of debts in western countries were “beginning to flash and flicker”, but that the UK government’s efforts to raise more funds via taxes risked driving its wealthiest taxpayers out of the country.
“The debt doom loop also is affecting capital flows,” the hedge fund founder told the Master Investor podcast with Wilfred Frost. He said the need to increase taxes was “driving people away. They move for their capital reasons.”
“A deterioration in conditions, as the financial problems and the social problems worsen, [is] having the effect of causing people with money to leave. That’s a problem because – I don’t know the exact numbers in the UK, but they’re analogous to the US – 75% of income taxes are paid by the top 10%.”
“So if you lose 5% of the population in that category, half of those people, you lose 35% or more of the tax revenue.”
The warning comes as the chancellor, Rachel Reeves, considers tax rises in her autumn budget, with growing speculation that she could target some of the wealthiest people in the UK, to avoid putting further pressure on consumers.
But some wealth experts have warned that could compound the effects of the abolition of the “non-dom” regime, which was triggered by the former Conservative government and maintained by the current Labour cabinet. Those changes ended the arrangements that allowed wealthy foreign people to avoid paying tax on money they were earning outside the UK, and avoid paying inheritance tax on their global assets.
Reeves is reportedly considering softening changes to the inheritance tax aspect of the non-doms clampdown.
However, a widely cited report suggesting millionaires have been leaving Britain has been criticised for making unsubstantiated claims. The Financial Times said that the Wealth Migration Reports, published in association with Henley & Partners – a consultancy that markets schemes that sell passports and residency permits to the wealthy – had relied heavily on LinkedIn data to deduce someone’s tax residence.
Dan Neidle, the founder of the Tax Policy Associates thinktank, said the report contained discrepancies and statistical anomalies. “Until an independent audit is carried out, the Wealth Migration Report should be treated as marketing material, not evidence,” he said.
Dalio, who officially retired from leadership roles at Bridgewater in 2021, said that ultimately, countries needed to move away from polarised politics and seek leadership from “a strong middle”, and prioritise lowering central government deficits to a “sustainable” level of about 3% of GDP.
“They have to do it equally in spending cuts and taxation. Because no one of those [alone] is possible. And if that is done, then interest rates will come down or not rise,” the hedge fund founder said.
The UK deficit was recorded at 5.7% of GDP at the end of 2024, according to the Office for Budget Responsibility (OBR), which is about four percentage points higher than the average advanced economy and the third highest among 28 advanced European economies.
Meanwhile, new figures released on Monday showed that the number of UK business now deemed to be in “critical” financial distress had jumped to 49,309 in the second quarter of this year, a 8.6% rise compared with the first three months of 2025. The insolvency experts Begbies Traynor said businesses were struggling because of a worrying cocktail of volatile consumer spending, global economic turbulence and rising taxes on business.
Julie Palmer, a partner at Begbies Traynor, said that “with no end in sight to the current economic malaise, I fear the financial burdens companies are enduring at present are simply too high for many not to avoid collapse”.
