UK AND SPAIN LEAD GROWTH IN EUROPE BUT FALL BEHIND MIDDLE EAST, NORTH AMERICA AND ASIA
London, June 9, 2005 â According to the latest Merrill Lynch and Capgemini World Wealth Report, the number of high net worth individuals in the United Kingdom rose by 8.9% to 417,500 in 2004. The results placed the UK in the Top 10 countries by HNWI* population growth and their combined wealth also rose by 13.5% to reach over US$1.5 trillion or Â£0.8 trillion.
"Looking globally, economic growth and market capitalisation worked together to generate the strongest increase in high net worth wealth that weâve seen in more than three years. On a regional level, the United Kingdom and Spain showed growth comparable to the worldwide rate, well-ahead of Germany, France and Italy. The main drivers of personal wealth creation in the UK were the GDP growth of 3.1%, low interest rates and the strong performance of the FTSE," said Ausaf Abbas, Head of EMEA Global Private Client group.
European Growth still lags behind other regions
2004 also witnessed the expansion of the European Union, with 10 new countries admitted as members. While the GDP growth varied from country to country, Germany, France and Italy, which together account for half of Europeâs economic output, remained in an economic trough.
Richard Thornton, Executive Consultant, UK Financial Services for Capgemini commented, "While structural issues in the European economy â notably high unemployment and slow GDP growth â constrained wealth creation across most of the region, the so-called BRIC nations â Brazil, Russia, India and China â continued to emerge as an economic force and create wealth in the process."
"Stock market gains as measured by the worldâs largest indices tended to moderate in 2004 after a very strong recovery in 2003, while growth in some of the smaller, developing markets was extremely strong, driven by commodities and oil," he continued.
Number of "Millionaires" Grows by Over 7% to 8.3 Million Worldwide The worldâs high net worth wealth grew strongly in 2004 for a second consecutive year,
increasing 8.2% to $30.8 trillion. The number of HNWIs grew by 7.3% to 8.3 million, a net increase of 600,000 worldwide. North America led with a nearly 10% growth rate to 2.7 million HNWIs, surpassing the 2.6 million in Europe. Asia-Pacificâs growth rate of over 8% to 2.3 million HNWIs was twice that of Europe.
Growth leading to Challenges for the Mid-Tier Millionaire
As wealth continues to grow, the report notes that HNWIs with financial wealth between $5 million and $30 million are facing particular challenges in managing their increasing net worth.
"Those HNWIs, whom we have termed the "Mid-Tier Millionaires" tend to respond to the paradox they are facing, added complexity and their desire to have customised solutions, by increasing the number of specialist providers to manage their wealth," stated Richard Thornton, Executive Consultant, UK Financial Services for Capgemini. "This, as well as the increase in cost
of maintaining their lifestyle overall, places additional pressures on performance expectations, especially in a recovering or stabilising market such as we have experienced over the past two years."
Forecast for 2005
After 2004, a year that marked the strongest economic growth worldwide in 20 years, growth is expected to temper in 2005. A combination of factors, including rising inflation and interest rates, is expected to slow global growth and affect the value of financial assets. As a result, global high net worth wealth is projected to grow at a compound annual rate of 6.5% over the
next five years, reaching US$42.2 trillion by 2009.
The key regional highlights and drivers are listed below:
Europe: With low growth, wealth creation lags
â¢ HNWI population growth in the UK and Spain, at 8.9% and 8.7% respectively, appears to
be significant and follows 2003 performance where these economies also outperformed
the rest of Europe.
â¢ In contrast, Europeâs HNWIs grew at a far slower rate as a result of the slow GDP growth
of its largest economies: France, Germany and Italy along with high unemployment and
tax burdens in the region.
Middle East and Africa: Oil and commodities are the story
â¢ The HNWI population in the Middle East and Africa (primarily South Africa) grew by
9.5% and 13.7% respectively, well ahead of 2003.
â¢ Oil and commodities drove dramatic gains in stocks trading in the United Arab Emirates and Johannesburg.
North America: Low interest rates and tax reform drive growth
â¢ Low and stable interest rates throughout 2004 drove spending on fixed investments,
which doubled from 2003.
â¢ HNWIs continued to benefit from tax reform, with protection from estate taxes steadily
rising through the end of the decade, before "sunsetting" by the end of 2010.
Asia-Pacific: As goes China, so goes the region
â¢ China, growing at 9.5%, drove economies across the Asia-Pacific region, with Australia,
Taiwan, South Korea, Malaysia, Singapore and Japan all benefiting.
â¢ If Chinaâs growth slows as expected in 2005, its neighbours are likely to feel the pinch.
One exception is India, the regionâs other 2004 success story.
Latin America: Wealth advances, led by Brazil
â¢ HNWIs grew by 6.3% in 2004, substantially higher than the 1.3% rate of 2003.
Nevertheless, wealth remained highly concentrated.
â¢ Brazil, accounting for roughly one-third of South American GDP, continued to dominate
South Americaâs economic landscape. There, government fiscal and monetary policies helped drive growth.