Over the last four decades, total wealth owned by UK households has been on a steady upwards path, rising from around three-times the value of Gross Domestic Product (GDP) in the mid-1980s to almost eight times GDP (840%) in early 2021.
The Resolution Foundation has found that the cost-of-living crisis, coupled with increased interest rates brought about by the monetary policy response, has put an end to the trend of rising wealth in the UK. The independent think-tank estimates that the wealth-to-GDP ratio fell to around 650% in early 2023, by far the biggest fall on record as a proportion of GDP, wiping out £2.1trn of household net worth in cash terms.
Looking ahead, should the rise in long-term interest rates persist, the Resolution Foundation predicts that household wealth would settle at around 550% of GDP, a level last seen in 2007. But, if downward pressure on long-term interest rates resumes, this could see wealth settling at around ten-times GDP.
It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.