Britain becomes a wealthier country with property accounting for £4.1tn of net worth according to the ONS
Britain became a wealthier country last year as the economy’s slow recovery from the deep recession of 2008-09 led to a 3.3% increase in the nation’s net worth.
The Office for National Statistics put a price tag of £6.8tn – an average of £110,000 for every man, woman and child in the UK – on the assets accumulated by households, businesses and the state.
Property made up the biggest component of the country’s wealth, accounting for £4.1tn of net worth following a threefold increase over the past 20 years.
Assets held by life insurance companies and pension funds accounted for £2.2tn of net worth and money held in currency and bank deposits a further £1.3tn.
The ONS said heavy borrowing to fund the budget deficit had taken a toll on the state’s wealth. Central government net worth stood at -£763bn at the end of 2011, a 40% deterioration during the course of the year.
“The largest downward pressure to UK total net worth by sector was provided by general government, of which central government was the largest contributor”, the ONS said. “The decline in central government total net worth can mainly be attributed to increased liabilities due to the number of government bonds issued to fund government spending. Due to a marked contraction of the economy during the recession the amount of tax collected over the past three years has been considerably less than the spending outlined. This shortfall has been mainly funded by the issuing of government bonds which have increased central government liabilities and consequently reduced UK total net worth.”
Britain’s net wealth fell in the two years from 2007 to 2009 as the financial crisis turned into the longest and deepest recession since the second world war.
Publishing its National Balance Sheet for 2011, the ONS said the small increase during the course of 2011 had been due to the “difficult situation” of households as well as the need to finance the government’s budget deficit.
It added that household spending power had been reduced markedly by inflation, which increased at almost twice the pace of wages.
“The labour market also remained fragile, unemployment rose to 8.1% in 2011 up from 7.8% in 2010. This contributed towards subdued consumer confidence and consequent reluctance of consumers to spend money. Over half of household wealth can be attributed to dwellings; house prices stagnated during 2011 after a mild recovery in 2010 from a pronounced fall during the financial crisis.
“Despite falling interest rates making mortgages more affordable, access to finance was limited, consumers tried to reduce levels of previous debt and confidence was subdued, resulting in a shortfall in the demand for housing.”