UK high-net-worth confidence falls

UK high-net-worth confidence falls after budget rollout and Trump’s return

The latest data from MillionaireVue, our omnibus of high-net-worth individuals, reveals that whilst UK millionaires’ confidence remains higher than in many previous quarters, confidence has dipped in Q4, down 5 points to 145.

UK millionaires demonstrate increasing pessimism towards both the global economy and their personal investments and savings since Q3, likely underpinned by key economic indicators, such as rising inflation and increasing taxes following the UK budget announcement in November 2024.

Whilst UK millionaires previously showed a potential disregard for the Labour governments tax changes on their overall financial standing, this sentiment appears to have shifted over the last quarter. For affluent individuals who either earn substantial incomes or rely on investment portfolios, tax changes such as the rise in Capital Gains Tax, the extension of the inheritance tax threshold, plus the inclusion of unspent pension pots from 2027, are all likely to have driven the increased pessimism.

The implications of such measures on investment returns, long term financial planning and wealth preservation makes it challenging for UK millionaires to remain optimistic under the new government. While UK millionaires previously demonstrated strong confidence in their ability to ride a potential storm on their financial futures, as evidenced by the FTSE 250’s 13% year-on-year rise at the start of Q3 2024, this confidence has waned with the new budget’s formal rollout.

Older UK millionaires confidence drops back down

Despite reaching record confidence levels in Q3, UK millionaires over 55 have once again become the most pessimistic age group, with confidence in personal savings and investments dropping 15 points in Q4.

Concerns about rising inflation outpacing state pension increases are likely driving this decline, as such changes could lead to increased anxiety surrounding real income and day-to-day living costs. This reflects a less settled domestic landscape and uncertainty about the security of their pension funds under the new government.

UK millionaires’ confidence lags behind EMEA and China

Key economic indicators such as inflation, the energy crisis, the reintroduction of disruptive policies under Trump’s presidency, and US-China geopolitical tensions are just some of the factors likely driving the decline in global economic confidence among UK millionaires this quarter. However, despite such concerns, confidence among millionaires in EMEA and China outperforms the UK, with confidence levels across both regions high at 150.

While confidence in the global economy is comparable across regions, optimism surrounding personal savings and investments is significantly higher among millionaires in China and EMEA, underpinned by economic growth and stability.

Confidence among Chinese millionaires aligns with the robust GDP growth seen in Q4, driven by strong industrial output, consumer spending, and export performance. Continued government fiscal stimulus measures, including infrastructure investments and support for key industries, have further strengthened economic growth and boosted investor confidence, thus explaining confidence with personal investments and savings at a high 165 in this market.

Similarly, in EMEA, countries like Germany and Switzerland have successfully kept inflation rates under control over the past few years, even amidst the pandemic. This success is attributed to a stable economy, prudent fiscal and monetary policies, and strong currencies, which have preserved the real value of personal savings and investments. Intuitively, millionaires in both regions demonstrate greater optimism about the security of their personal savings and investments compared to UK millionaires, due to benefiting from a more favourable investment climate.

So what does this mean for you?

Overall, the UK’s high-net-worth population continues to show optimism and resilience, yet maintaining this upwards trajectory is crucial. There is heightened vigilance regarding the long-term implications of the new UK government’s budget and the potential shifts following Trump’s return to presidency that are going to be important concerns for businesses to help millionaires overcome.

Wealth Managers must continue to keep clients informed about emerging changes and challenges as the UK government enacts its new budget. Effective financial planning is essential in the coming months to restore client confidence, particularly through comprehensive tax planning services that help navigate the new tax implications from Labour’s policies. This approach will boost client perceptions by demonstrating tax-efficient asset management.

Additionally, discussing the benefits of holding international assets could further boost confidence in the global economy, showcasing the value of diversifying investments.

Helping clients understand how to access regulatory advice and obtain reliable information can encourage them to invest more overseas to combat concerns surrounding the unstable economic climate in the UK, thereby growing their confidence in the global economy.

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