Significant wealth decline among upper-income UK families: United Kingdom ranks second among significant economies in household wealth erosion
Rich Brits Take a Hit, While the Average Joes See Gains
It turns out that the good times aren't shared equally in the UK. A new report reveals that the second biggest decline in average household wealth occurred in Britain last year, but this loss wasn't felt evenly across the economic spectrum. Higher-income households suffered a significant setback while households lower on the income ladder saw their wealth grow.
Real-term household wealth, adjusted for inflation, dipped 3.6% across Britain in 2024, according to UBS Global Wealth Management. But this decline was masked by the wealthy falling behind and dragging down the average, while those further down the income ladder fared better.
Paul Donovan, chief economist at UBS Global Wealth Management, noted that "most people in Britain enjoyed a significant increase in their real wealth levels in 2024 - median wealth grew over 5% in real terms and wealth distribution became more equal." However, "a number of higher income households experienced slower wealth growth, and when adjusted for inflation, their experience pushed the average lower."
Michel Frey, head of UK high net worth business in UBS' wealth management arm, explained that the decline in average real-term household wealth in Britain was due to rising cost of living pressures and higher interest rates outpacing most financial market or property price growth. This combination of forces made it difficult for some people to maintain or build their wealth, particularly high net worth individuals.
While average real-term household wealth slipped 3.6% in 2024, median wealth showed a different picture - it experienced over a 5% increase. Donovan believes that the underperformance of the UK equity market compared to European and US equities, coupled with the fact that higher-income households hold more equity than most UK households, likely contributed to the disparity.
As the wealth gap widens in the UK, concerns are growing over the potential exodus of wealthy individuals from Britain. Indeed, MP Rachel Reeves is reportedly considering softening non-dom inheritance tax rules in an attempt to keep wealthy residents from fleeing.
Aside from Britain, countries like Turkey, Mexico, France, the UAE, mainland China, and Russia also saw a decrease in average real-term household wealth in 2024. Among these, Turkey experienced the biggest decline, with average real-term household wealth falling 14% last year due to rampant inflation.
In summary, the decline in average household wealth in Britain primarily affected the wealthier segments of society, while the typical household saw its wealth rise. High net worth individuals and billionaires, in particular, seem to have faced a setback, potentially because of financial market fluctuations or other economic factors. This disparity in wealth distribution highlights the growing economic divide in Britain.
- High net worth individuals and billionaires in Britain experienced slower wealth growth, contributing to the decline in average real-term household wealth, due to factors such as rising cost of living pressures, higher interest rates, and the underperformance of the UK equity market.
- While the average real-term household wealth slipped in 2024, the median wealth actually experienced an over 5% increase, indicating that the wealth disparity in Britain has widened.
- In efforts to address this issue, MP Rachel Reeves is reportedly considering softening non-dom inheritance tax rules to prevent wealthy residents from fleeing Britain.
- The decline in average real-term household wealth in Britain was not an isolated occurrence, as countries like Turkey, Mexico, France, the UAE, mainland China, and Russia also saw a decrease in their average real-term household wealth in 2024.
