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Investors in a ‘State of Shock’: Blackrock

A new report suggests that five years of gloomy headlines and negative sentiment have combined to create a collective "state of shock" among investors.

The Blackrock report, which surveyed 11,000 investors across Europe claims that the barrage of bad economic news has left investors psychologically scarred.

"We're seeing 68 percent of British investors very worried about the economy for the next six months, 58 percent regard themselves as risk averse and that is leading to a state of paralysis with 77 percent of them sitting on cash," Tony Stenning, Head of UK Retail at BlackRock told CNBC Europe's "Squawk Box."

The report also found that one in three investors had moved into cash in the last twelve months.

Stenning added that much of the investor caution was down to a lack of trust and confidence in the system where cash is king.

"We need to get investors away from preserving wealth and looking beyond cash, [people are] forgetting about building return. We must simplify things," he said.

Bob Janjuah, Co-Head of Cross-Asset Allocation Strategy at Nomura was scathing about the role of policymakers, arguing they were to blame for investors hunkering down.

"There is a fundamental lack of belief in policymakers. Come on, these guys have been telling us about the final solution and how they'll fix Greece for the last three and a half years and now it's another 40 billion today. They have no credibility. People will do what they have to do to survive," Janjuah said.

(Read More: Global Growth Woes - Here's Where the Blame Lies)

Stenning added that investors needed to be educated to understand the potential pitfalls of sitting on cash.

"Investors need to understand that inflation has a ravaging effect on wealth. Just 3 percent inflation rate over 25 years could reduce the purchasing power of your pot by half. (The challenge is) getting people to understand that they need to look beyond cash and at equities and bonds," he said.

-By CNBC's Shai Ahmed, Follow her on Twitter @shaicnbc

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