Soaring property values and the recovery of the banking sector pushed the value of Britain’s wealth to £7.6tn in 2013, according to official figures that measure the nation’s total assets minus its debts.
The value of homes rose to £4.7tn last year, more than three times their estimated value of £1.4tn in 1997.
The statistics from the Office for National Statistics showed that this boom in property prices pushed household wealth to an average £289,000. The main drag on wealth came from the government’s increasing debt and a drop in households’ accumulated financial assets following a period of falling stock markets.
Data shows a £468bn, or 37%, decline in the net worth of “equity and investment fund shares/units” between 2012 and 2013.
Britain’s wealth has become a hot topic since the publication of Thomas Piketty’s book Capital this year, in which he argued that the UK, along with France, the US and most developed countries, had experienced a concentration of assets among the top 1% of wealth owners. The ONS’s measure of inequality has changed little in the past decade, allowing the Treasury to argue that the balance of wealth has not worsened in recent years.
The latest official survey of UK household incomes and wealth shows around a third of all UK households has either negative net worth – debts greater than their assets – or net financial assets worth less than £5,000. Piketty said the top 10% of wealth owners have in recent years accounted for 60% to 70% of all assets.
The ONS said the net value of central government fell £663bn, largely in response to its increasing debts, though this was offset by a £505m rise in the value of local government, which not only owns property that has climbed in value but has also accumulated savings in response to the threat of severe funding cuts.
The value of companies outside the City also fell, though largely as a result of incentives to follow the private equity model and pile up debts.
The ONS said non-financial corporations, which represent the bulk of the UK’s corporate sector, had an estimated total net worth of -£1.2tn at the end of 2013. “The estimated net financial worth has decreased since 1997 by £1.6tn (98%). This meant that non-financial corporations owed nearly twice as much in current prices at the end of 2013 than they did at the end of 1997,” the ONS said.
Rules that allow companies to deduct interest payments on debt from taxable profits encourage them to rack up huge debts to repay investors and buy rival firms. The higher the debts, the more debt interest there is to offset against tax. This development has not only depressed the country’s net assets, but also cut corporations’ tax payments dramatically over the last 18 years.
ONS figures also show that the UK has experienced huge fluctuations in the size of its net wealth, compared with other G7 nations. It underwent the largest downturn and recovery before joining France, Germany and the US with 3% year-on-year growth in 2013.
A strengthening of the property boom and strong stock market gains in 2014 are likely to keep the trajectory of national wealth heading north for a fifth year, though rising government debt levels will continue to be a drag.
