UK Experiences Second-Largest Reduction in Wealth among Major Economies in 2024
A Fresh Look at the UK's Financial Landscape in 2024
Britain took a hit in the global wealth race in 2024, with mean household wealth plummeting second only to Turkey, according to UBS's yearly Wealth Report. This revelation has compounded concerns over halted wealth creation and a growing trend of the UK's wealthiest residents sailing off to greener pastures.
The UK's average household wealth plunged by a staggering 3.6% in 2024. Though Turkey's worsening economic crisis overshadowed the UK's decline, it's worth noting that Turkey's wealth dropped a staggering 14% in real terms. A perfect storm of economic turmoil pushed Turkey's average wealth downward, with inflation soaring past 75% and interest rates reaching a mind-boggling 50%.
The UK's downward spiral in wealth is attributed to two main factors: the lackluster performance of the London Stock Exchange and a scarcity of house price increases. Michel Frey, head of UBS's UK high net worth (HNW) wealth management arm, highlighted these challenges as primary reasons for the wealth deceleration. "Rising living costs, coupled with soaring interest rates, outpaced household wealth-boosting factors like house price growth and market performance," Frey explained to City AM. The country's median household assets, however, increased by over 5%, indicating that it's the affluent percentage of society that bore the brunt of the wealth reduction.
Meanwhile, the United States saw a remarkable surge in wealth growth. UBS's report revealed that American households' assets notably expanded by 11%, compared to a worldwide average of 4.6%. The US market, home to the richest nation, gained over 1,000 millionaires each day in 2024, as the S&P 500 jumped over 25% and its economy advanced by 2.8%. Frey identified the stark contrast between the US's blue-chip index's growth and London's FTSE 100 as the difference-maker between the two countries. "London equities lagged behind US-based investments, with the FTSE 100 seeing only a modest 5.7% increase, while U.S. property prices boomed by 4.7%," he said.
Frey emphasized the importance of improving the London Stock Exchange and encouraging home-grown companies to list there as critical steps toward improving the UK's wealth retention and growth prospects. "Revitalizing the London Stock Exchange and fostering an environment conducive to high-growth companies can go a long way in anchoring future wealth creation," he suggested.
The report echoes other significant research on the dwindling wealth in Britain, suggesting a trend of high-net-worth individuals departing for lower tax jurisdictions. In 2024, a report by Henley and Partners estimated that around 10,800 dollar millionaires had emigrated, a trend expedited by the government's suspension of non-dom status and other tax increases in the Autumn Budget. The loss of such a substantial portion of wealth creators and taxpayers raises legitimate concerns about the UK's long-term economic health.
However, it's essential to exercise caution when interpreting the scale of the wealth exodus, as some reports may misrepresent the actual figures. According to experts, the media often exaggerates the number of millionaires departing, with some data sources criticized for unreliable samples and a lack of transparency. Despite these concerns, the overall trend suggests that the UK may struggle to retain its wealthy residents, posing challenges to investment, risk-capital formation, and economic growth.
- The decline in the UK's wealth, as indicated by the UBS Wealth Report, has raised concerns about the economy's future, particularly in the context of the property market and business investments, as the London Stock Exchange's performance and house price increases have been less favorable compared to other markets.
- Michel Frey, head of UBS's UK high net worth (HNW) wealth management arm, suggests that revitalizing the London Stock Exchange and fostering an environment conducive to high-growth companies could help improve the UK's wealth retention and growth prospects, thus potentially anchoring future wealth creation.
- While the media requires caution when reporting on the wealth exodus, as some reports may misrepresent the actual figures, the overall trend suggests that the UK may face challenges in retaining its wealthy residents, potentially impacting investment, risk-capital formation, and economic growth.
