UK wealth grows… especially for the wealthy
It’s official: The wealthiest people in the UK are getting even wealthier.
New figures from the Office for National Statistics show that UK households grew their combined wealth by 13% between April 2016 and March 2018 (the most recent data).
Much of that increase is due to rising asset prices — which benefits the wealthiest as they tend to own them; either outright, or in their pension pots.
Rising property prices have also boosted wealth (but again, that’s only good news if you own your own home, or someone elses…)
And that’s why the wealthiest 10% of families got the biggest boost, while the poorest 10% saw little improvement.
The ONS says:
- The total net wealth of private households in Great Britain was £14.6 trillion in April 2016 to March 2018, an increase of 13% in real terms from April 2014 to March 2016, mainly because of increases in private pension and net property wealth.
- Median household net wealth in Great Britain in April 2016 to March 2018 was £286,600, an increase of 9% from April 2014 to March 2016, after adjusting for inflation.
- Total wealth inequality in Great Britain is broadly unchanged in the most recent period, though it has increased since July 2006 to June 2008, based on a number of measures of inequality.
- Inequality in net property wealth and net financial wealth has increased between July 2006 to June 2008 and April 2016 to March 2018, while inequality in pension wealth has fallen.
- Average (mean) wealth for all wealth deciles increased in real terms between April 2014 to March 2016 and April 2016 to March 2018, with the higher deciles seeing the biggest increases; the average for the poorest decile increased 3%, and the richest wealth decile increased by 11%.
Richard Falkenhäll, senior FX strategist at Nordic bank SEB, reckons sterling’s recovery could be short-lived.
He fears another cliff-edge Brexit crisis in a year’s time following a Conservative victory, as it will be very hard to agree a new free trade deal quickly.
Falkenhäll writes:
“The pound continues to gain on the back of opinion polls showing a stable lead for the Conservative party, and markets are now probably almost fully discounting a Tory majority in UK Parliament after the general election.
“While this would create some certainty around Brexit in the short term as the UK will then leave the withdrawal period and move into the transition period in January 2020, a Conservative win will in fact increase the risk of the UK falling out of the EU without a trade deal by the end of next year (2020). It might be that the GBP recovery could turn out to be quite short-lived.”
Earlier today, chancellor Sajid Javid said he was confident that the UK and EU could agree a future relationship before the end of the withdrawal agreement in December 2020.
But there’s considerable scepticism about this…..
Van sales tumble
Sales of vans also fell sharply in the UK last month, suggesting businesses are hunkering down until the election is over.
New van registrations slumped by 9.6% compared with November 2018, new figures show. That’s the third monthly decline in a row.
Registrations of small vans (below 2 tonnes) have tumbled by 24%, while large vans (2.5-3.5 tonnes) are down 11.4%. Pickup sales are up, though.
The SMMT’s Mike Hawes blames political uncertainty:
“A third consecutive month of decline for new van registrations is concerning, particularly after growth for much of the year.
Ongoing political uncertainty doesn’t help inspire business confidence but this is essential if we are to embolden further investment in new vehicles which will go a long way to improving air quality in our towns and cities.”
Our Politics Live blog is tracking all the latest general election latest – including some interesting defections from the Brexit party today:
Willem Klijnstra, currency analyst at Legal & General Investment Management, has told the Financial Times that a Johnson win next week is ‘baked in’ to the pound’s current valuation.
He says:
A Tory-led government is baked in today. The tail risk is that doesn’t happen.”
Klijnstra also points out that a Conservative win would take attention “straight back to Brexit” — both the withdrawal from the EU by 31 January and the trade talks.
Trade experts doubt the government claim that it can agree a comprehensive deal by the end of 2020, so further tensions next year would weigh on UK assets.
The pound has dipped a little since the UK car figures came out, but is still at a 31-month high against the euro at €1.184.
That’s its highest level since Theresa May held her ill-fated snap general election, when opinion polls predicted a solid Conservative win.
Investors seem to believe the pollsters are doing a better job this time.
As Jim Reid of Deutsche Bank told clients today:
Sterling has been supported by investor hopes that a Conservative majority at the election will support a smooth ratification of the Withdrawal Agreement through Parliament, taking away some of the short-term uncertainty over the Brexit process.
The sole poll yesterday came last night and showed a 10pt lead for the Tories – unchanged from the previous poll and in-line with the poll of polls.
Next week’s general election hasn’t helped the car industry, says Ian Plummer, commercial director at Auto Trader.
Here’s his take on the drop in car sales last month:
“Manufacturers are coming up against unprecedented cost hurdles as they take the journey towards the electrification of their fleet and also fight to hit the stringent new CO2 emissions regulations next year. Some of the biggest industry stalwarts have recently announced job losses as they look to refocus their businesses to deal with these issues. Compounding that, issues caused by Brexit continue to hinder the industry too; the unsteady value of the pound, consumer uncertainty and the ambiguity around future trading regulations only serve to amplify the enormous pressure manufacturers are under. And in the short term, both the manufacturers and their franchised retailers, still have ambitious targets to meet to reach despite these wider economic challenges.
“Brexit, and now the election, is also further dampening consumer buying confidence, making it ever-harder to sell cars.
Although electric car sales have risen steadily this year, they only make up a small proportion of the market.
Nearly two-thirds of consumers are still plumping for a petrol engine, as this chart shows.
That’s why the SMMT are calling for cash incentives, and more electric charging point to encourage customers to switch.
A survey earlier this year showed that electric cars are now more affordable than petrol in some countries, as lower taxes, fuel costs and subsidies makes up for a higher purchase price.
But some consumers could be put off by the range provided by current models. MG’s ZS EV (£26,995), for example, promises a range of 163 miles on a single charge.
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Political uncertainty is deterring consumers from buying a new car, says Mike Hawes, the SMMT’s chief executive.
He’s also calling for more government support for electric cars.
“These are challenging times for the UK new car market, with another fall in November reflecting the current climate of uncertainty. It’s good news, however, to see registrations of electrified cars surging again, and 2020 will see manufacturers introduce plenty of new, exciting models to give buyers even more choice.
Nevertheless, there is still a long way to go for these vehicles to become mainstream and, to grow uptake further, we need fiscal incentives, investment in charging infrastructure and a more confident consumer.”
UK car sales fell in November
Newsflash: UK car sales have fallen again, led by yet another slump in diesel demand.
Sales dropped 1.3% year-on-year in November, with 156,621 models registered.
With just one month to go, car sales are down 2.7% this year compared with 2018.
Diesel car sales slumped by 27% year-on-year, as the crackdown on polluting vehicles continues to deter consumers. Petrol rose by 2%.
The figures also show that alternatively fuelled vehicles now have a record market share of 10.2%. That’s hybrid, plug-in hybrid or pure electric cars.
Reaction to follow….
Over in Germany, the factory slump continues to drag on.
German industrial orders fell unexpectedly in October, by 0.4% month-on-month, new government data shows.
That means orders are 5.5% lower than a year ago, as the ongoing US-China trade war and slowing global growth hits Europe’s largest economy.
The pound was the biggest mover in the foreign exchange market yesterday, as it rallied against other major currencies.
With fresh gains this morning, forecasts of a Conservative win next week are lifting the currency, explains Lee Hardman of Japanese bank MUFG:
With only a week to go until the UK election, the Tory party still hold a sizeable lead of around 10 percentage points over Labour. It has made market participants increasingly confident to price in a Tory majority and an end to the deadlock in parliament.
Boris Johnson set out his agenda yesterday for the first 100 days of a Conservative government. He pledged that legislation to implement his EU withdrawal agreement will be put back before parliament ahead of Christmas as he aims to take the UK out of the EU by the end of January. There are also plans for a February budget which would quickly implement plans to begin raising the threshold for paying national insurance tax.
With the pound increasingly pricing in a Tory election victory ahead of the event, there is some risk of “buy the rumour sell the fact” price action following the announcement of the election result even if the Tories secure a majority as expected. Pound price action would be much more volatile if the opinion polls were to prove misleading.
Currency expert Kit Juckes of Societe Generale writes:
Sterling rallied on continued optimism about a Conservative win in the General Election and, as one wag put it, an absence of gaffes from Boris Johnson.
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Pound keeps rallying as Conservative win looms
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
With a week to go until the general election, predictions of a Conservative victory are pushing the pound higher.
Sterling has hit a fresh 31-month high against the euro this morning, touching €1.185 for the first time since May 2017. It’s also continuing to climb against the US dollar, touching $1.314 – a seven-month high.
Traders are increasingly confident that Boris Johnson will be returned to Downing Street, probably with a working majority that will allow him to push his Brexit deal through parliament by 31 January.
The latest YouGov polling gives the Conservatives a nine-point lead, which could be enough to avoid Johnson’s nightmare scenario of another hung parliament.
Johnson will be relieved that the NATO summit passed off without Donald Trump wading into UK politics — beyond denying that he has covetousness desires for the NHS.
Overnight, the Conservatives have also wheeled out some pledges designed to woo voters next week, including a tax-cutting budget in February and a boost to education spending.
Michael Hewson of CMC Markets says the pound’s rally shows that the City is expecting an orderly Brexit early next year:
The pound broke to the upside yesterday, as President Trump came and went while managing to avoid courting controversy over the NHS, and by virtue of that putting Boris Johnson in a difficult spot.
As a result of that currency markets appear to be starting to price out the prospect that Labour might win a majority at next week’s election. Having been so negative on the pound for so long, markets are starting to believe in the prospect that we could well start to see the prospect of an orderly withdrawal from the EU in the next two months, and thus short positions are starting to get squeezed out, sending the currency to its best levels against the euro since before the 2017 election.
Also coming up today
We find out how many new cars were bought in the UK last month – a poor reading could suggest consumers are cautions ahead of the general election.
Oil ministers from the Opec cartel are meeting in Vienna today. They could agree output cuts in an attempt to push crude prices up.
Financial markets are still nervous about the prospects of a US-China trade deal, following conflicting noises this week. The clock is ticking towards 15 December, when Washington could impose additional tariffs on Chinese imports.
The agenda
- 9am GMT: UK car sales for November
- 2pm GMT: Opec meeting: opening session
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