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Prof. Trevor Williams is Chair and Co-founder of FXGuard and former Chief Economist at Lloyds Bank Commercial Banking.
The global wealth outlook in the Henley Private Wealth Migration Report 2024 reflects the current challenging economic context. However, it also highlights the resilience of the world economy despite the shocks of the past few decades in which it has experienced two once-in-a-century events. The first was the global financial crisis of 2008–2009, and the second was the coronavirus pandemic in 2020. In 2022, the most extensive land war in Europe since the end of the Second World War started with Russia's invasion of Ukraine. Now in its third year, it shows little sign of ending.
The invasion of Ukraine precipitated a surge in inflation, contributing to the end of the low inflation period that had persisted since the 2008–2009 global financial crisis. Indeed, in many countries, the inflation experienced between 2010 and 2021 was the weakest since central bank records began, and so, consequently, were interest rates.
Ultimately, the end of ultra-low inflation led to the end of 14 years of ultra-low interest rates. Central banks reacted to the rise in inflation sparked by the Russian invasion of Ukraine by sharply raising official interest rates from the record lows seen post-2008–2009. For instance, in the UK, the bank rate was cut to 0.1% in 2020 in response to weaker economic growth arising from the pandemic-induced economic lockdown. That was the lowest the Bank rate had reached since the Bank of England was created in 1794. Since the war in Ukraine started in 2022, however, interest rates have been raised 14 times to 5.25%, the highest level since 2005.
However, with consumer price inflation falling towards the central banks’ 2% target, the first cut by a G7 economy has now occurred. The Bank of Canada has cut interest rates from 5% to 4.75% following the 0.25% cut by Sweden in May and Switzerland in March. The eurozone, which accounts for 15% of global GDP according to the IMF, lowered its central Bank rate for the bloc from 4.25% to 4% in June.
Not surprisingly, this will put pressure on the Bank of England — which meets on 20 June — to cut its main official interest rate from 5.25% to 5%. That is especially the case since UK consumer price inflation of 2.3% in the year to April is lower than that of Canada (2.7%) or the eurozone (2.6%), according to data published by their respective national statistical offices. Figures released later in June could show UK inflation falling closer to the 2% target than any advanced economies that have cut rates so far this year.
Monetary policy was tightened worldwide to help ward off the rise in price inflation created by the Russian invasion of Ukraine, which had pushed up food and energy prices. Therefore, fiscal policy took up much of the slack of supporting public spending from the subsequent fall in tax revenue resulting from weaker economic growth. Central banks used higher interest rates to keep a lid on inflation expectations.
At the world level, total debt is a higher percentage of GDP than during the 2008–2009 global financial crisis. That crisis required the fiscal authorities to use the public sector balance sheet to alleviate financial shocks and prevent them from affecting the broader economy further. Since then, efforts to reduce the effects of the economic downturn caused by the pandemic lockdown imposed by many governments have increased public sector debt. The hope is that maintaining globalization, the market economy, and encouraging economic growth through policy actions will, in time, reduce the amount of debt as a share of GDP.
Despite these challenges, the world economy has proved remarkably resilient. Economic growth last year was 3.2%, with the same pace expected this year and projected for 2025. While the annual average global growth of 3% is lower than the 4% we saw before the global financial crisis in 2008 and 2009, it still means a significant increase in global wealth and prosperity. Over 10 years, a 3% increase in global economic growth equates to USD 38 trillion in global GDP.
Moreover, economic growth is unevenly distributed. The developing and emerging economies are forecast by the IMF to grow at over 4% over the next five years — more than twice the rate of the advanced economies, allowing economic catch up to continue. That has enormous implications for the distribution of the growth of millionaires, centi-millionaires, and billionaires worldwide. Many countries from the so-called developing world are seeing a significant increase in their ultra-high-net-worth individual populations because of the faster growth rate of their economies.
Geopolitical crises such as ongoing wars in Europe, the Middle East, and Africa and a fragmenting global consensus on the institutions created after the Second World War at Bretton Woods (the World Bank, the IMF, the UN, the WTO, and the International Criminal Court) have thankfully not outweighed the positive forces still driving global growth and prosperity. The overwhelming need is to raise prosperity for those still less well-off, which means retaining the wealthy's ability to invest and live freely abroad.
Reflecting global economic resilience, the increase in millionaires and ultra-high-net-worth individuals has remained rapid worldwide. The average growth in millionaires in the decade from 2013 to 2023 for the Top 15 wealthiest countries (W15) in Henley & Partners’ country wealth rankings was 36%. What stands out is the 92% growth in China’s high-net-worth individual population, 85% in India’s, and 62% in the USA’s, which highlights how strongly correlated millionaire growth is with economic development, and that the size of the economy matters, as these are the three largest economies by population in the world and the strongest economically.
A disappointing economic performance by the UK partly explains why it has seen an 8% fall in the number of millionaires in the same period despite retaining its status as one of the most attractive places for the ultra-rich. Japan also saw negative millionaire growth, of -6%, because of slower economic growth, partly owing to weaker productivity gains owing to an aging population.
However, there has been some strong millionaire growth in a broad spread of other countries, from Vietnam (98%) to the UAE (77%), which is a reminder that the key drivers of wealth are still in place. Think of the digital transformation and technical innovations that are taking place, continued market growth and investment, the mobility of talent, the growth in financial markets including stock markets and private equity, the global real estate boom, the increase in new assets such as cryptocurrency and digital assets, and of course knowledge-intensive industries, which rely on highly skilled and talented people, no matter where they hail from.
The more affluent a country is, the more likely it is to produce high-net-worth individuals. However, countries that are considered secure places to store one’s wealth, with significant management expertise and legal protections, such as Monaco, Switzerland, and the Cayman Islands, will also see an inflow of high-net-worth individuals, particularly in times of crisis elsewhere, as they are seen as safe havens.
High-net-worth families see certain global cities, such as London, New York, Singapore, and Dubai, as attractive places to settle in for reasons such as legal and regulatory access, quality of life, healthcare, education, and safety and security, and the countries in which they are situated reap the benefits. Unsurprisingly, the list of stable countries with a high quality of life, which see inflows of the rich, especially if there is instability elsewhere, also features Canada, Australia, and Italy.
Yet despite London being a global city, the UK is projected to have the second largest outflow of high-net-worth individuals after China in 2024. One reason is that its economic performance has been poor over the last decade compared to its peer group (the G7 countries) and its historical record. In contrast, the USA’s economic performance was easily the best of the advanced economies over the last few years. The US economy expanded by 2.5% in 2023, and 2.7% is forecast for this year. According to the IMF, the UK’s economic growth was just 0.1% in 2023, with a modest rise to 0.5% forecast for this year before rising to 1.5% in 2025.
Another contributing factor in the outflow of millionaires from the UK is the change in the tax regime, with both political parties vying for office, giving the green light to reforming the non-dom regime to increase tax on non-doms and tightening the regulatory framework, making non-dom status harder to obtain. But that is only part of the explanation. Another aspect is the UK Government’s support for Ukraine and its backlash against the many Russian oligarchs and high-net-worth individuals who had made London and the UK their preferred location before the Russo–Ukrainian war. The official pushback began before the war, however, after some high-profile attacks on Russians in the UK, which led to the British government taking punitive measures against Russia, including the expulsion of diplomats.
However, in 2023, despite a net outflow of 4,200 millionaires, the UK ranked 5th in the W15, behind the USA, China, India, and Germany, with 75 billionaires, showing that it retains its allure to many wealthy people worldwide, based on its status as a global place to be domiciled and to invest. And despite Brexit, the UK retained second position for foreign direct investment into Europe from overseas last year. It was the only country that saw a surge in investment projects last year and an increase in its share of the European investment market to 17.3, up from 15.6% in 2022. Still, as the scrapping of the non-dom status is now a reality, we may only see the full effects once the data for 2024 are known next year.
As the global economic recovery continues, future global challenges and opportunities abound due to significant economic volatility caused by ongoing rapid changes in population shares, the consequences of global warming, and the accelerating technological revolution. That means opportunities for wealth to spread and grow remain equally strong.
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