British households have had the biggest hit to their wealth of any advanced economy since the pandemic, which is a sobering sign for a country that once boasted growing prosperity.
The average Briton is now more than a fifth poorer than five years ago, according to UBS. Of the 37 countries the Swiss bank surveyed, none experienced a significant decline.
The average person's wealth has fallen by around £28,500 from 2020 if inflation is taken out, leaving the average adult with just over £95,500 in assets last year. That makes the British slightly better off than the French, but poorer than the Dutch and Italians, a level that would have seemed impossible a decade ago.
Wealth here is measured by the value of assets such as property and stocks, and has eroded rapidly after inflation due to the pandemic and Russia's invasion of Ukraine. Britain received a worse shock of inflation than most of its peers as energy costs rose, further pressuring and shaping the broader picture of living standards.
The cooling housing market has deepened the slump. Notably, British households have become more affluent over the past five years than households in Turkey, Bulgaria, Mexico and Kazakhstan.
The UBS findings underline the enormity of the task facing Andy Burnham as he prepares to become the next prime minister. In his first major speech since returning to the Commons, the Makerfield MP said this week: “We cannot go through another decade like the one we have just had. We need a new determination to raise living standards for everyone in this country.”
Separate figures from the Office for National Statistics, published on Tuesday, showed that Sir Keir Starmer failed to deliver on his promise to improve living standards, with families now worse off than they were before he entered Downing Street.
UBS data shows that the average person's wealth has fallen by more than 23 per cent in both median and median terms since 2020, offset by inflation rising to 11.1 per cent in October 2022.
Paul Donovan, chief economist at UBS Global Wealth Management, said: “The UK has had a short period of higher inflation than Europe, and that has distorted real rates.
The housing market added to the difficulty. UK house prices have risen by 26 per cent since the start of 2020, according to the ONS House Price Index, but consumer prices have risen by 32 per cent over the same period, meaning the real value of the mortgage on the average home has been quietly removed.
Donovan added: “Real estate is heavily weighted as a form of wealth because it is the largest asset most people own. Changes in the relative performance of the local property market can have a significant impact on, in particular, the level of average wealth over time.”
The decline in wealth has been accompanied by incomes that have struggled to keep pace with prices, putting double pressure on households. At the same time, the tax burden is set to rise to its highest level since the Second World War, driven in part by the long-term suspension of income tax caps, a problem explored in Business Matters' compilation of Britain's record tax burden.
The picture is not uniformly bleak around the world. The biggest gains came in South Korea, where average wealth rose 55 percent, as well as Russia and Croatia. Among the G7 economies, the biggest increase was in Japan, where average wealth rose by 51 percent.
The data came as the Institute of Directors said business confidence fell again in June. Anna Leach, the chief economic officer of the organization, said that he had pointed out that there is an urgent need for ministers to support economic growth.
“Businesses need to see meaningful improvements in areas such as regulatory costs, tax complexity and the speed and consistency of government decisions to unlock spending and drive growth,” he said.
A Treasury spokesman was upbeat: “We have a sound economic system. Inflation has held steady, the UK led the G7 in growth at the start of the year, and the IMF and OECD both upgraded growth forecasts. Real wages rose more last year than in the first decade of the previous government.” That claim of firmer prices is consistent with the latest ONS inflation reading, although for many households the damage to accumulated wealth has already occurred.
