The UK national balance sheet estimates: 2012

• UK total net worth at the end of 2011 was valued at £6.8 trillion, an increase of 3.3 per cent from 2010

• UK total net worth was equivalent to approximately £110,000 per head of population in 2011

• Households and non-profit institutions serving households (NPISH), with a total net worth of £7.0 trillion, continued to be the sector with the highest total net worth. The most valuable assets in this sector were dwellings (£4.1 trillion), insurance technical reserves (£2.2 trillion) and currency and deposits (£1.3 trillion)

• Central government total net worth was -£763 billion at the end of 2011, a decrease of nearly 40 per cent compared with 2010

• Due to changes announced in The Improvements to the Non-Financial Balance Sheet, figures in this bulletin are not comparable with those published in previous years. Care is also needed when comparing years after 2005. See the introduction chapter and background note 7 - IFRS for further details

This annual bulletin provides estimates of the market value of financial and non-financial assets in the United Kingdom for 2011. This is a measure of the wealth of the UK and is available by sector and type of asset. The data are used to monitor economic performance, inform monetary and fiscal policy decisions as well as for international comparisons. This bulletin was previously named non-financial balance sheets.

The article Improvements to the Non-Financial Balance Sheet was published in February 2012 and explains the changes to the national balance sheet data in this bulletin. The main change, to align with the European System of Accounts 1995 (ESA1995), is the removal of non-marketable tenancy rights from the balance sheet; which has had the effect of reducing UK net worth by around £600 billion.

Another change is the presentation of the figures to ensure consistency with ESA1995. More detail on these changes is available in the background notes section towards the end of this bulletin.

Non-financial assets include both tangible and intangible assets. Tangible assets consist of property, machinery and equipment, agricultural assets, vehicles, certain types of farming stocks (mainly dairy cattle and orchards) and military equipment whose use is not solely destructive. Intangible assets consist of the value of computer software, patents, mineral exploration and artistic originals.

Financial assets comprise means of payment, financial claims, such as loans, and economic assets, which are close to financial claims in nature, for example shares. Each financial asset has an equivalent liability, with the exception of monetary gold and special drawing rights.

The data set for this bulletin is available in the accompanying spreadsheet as well as in Chapter 10 of the United Kingdom National Accounts: Blue Book. Background notes are toward the end of this bulletin and provide information on coverage, quality and how to use the data. Changes in methodology and in international accounting standards are also explained in these notes and are important to assist with the interpretation of this dataset.

Accompanying this release is an opportunity to comment on ‘The National Balance Sheet’ by completing our user feedback survey.

UK total net worth at the end of 2011 was valued at £6.8 trillion, an increase of 3.3 per cent from 2010. UK total net worth more than doubled in the 20 years from 1991 to 2011.

UK total net worth was equivalent to approximately £110,000 per head of population in 2011.

Households and non-profit institutions serving households (NPISH) sector

The households and NPISH sector had a total net worth of £7.0 trillion in 2011, making it the sector with the highest total net worth. NPISH consists of organisations such as charities, universities, churches and trade unions, who provide services to households free or at non-economically significant prices. The most valuable assets in this sector were dwellings (£4.1 trillion), insurance technical reserves (£2.2 trillion) and currency and deposits (£1.3 trillion).

Non-financial corporations

The non-financial corporations sector had a total net worth of £76.2 billion in 2011, a rise of £182.5 billion compared with 2010. This increase was mainly due to an increase of 16 per cent in the value of other structures and an 8 per cent increase in the value of currency and deposit assets. The change in other structures is mainly due to the change in international accounting standards as described in background note 7.

Financial corporations

The financial corporations sector had a total net worth of -£24.8 billion in 2011. Although remaining negative, the total net worth of financial corporations has risen from -£244.8 billion in 2010. This was mainly due to a net £356 billion increase in the assets of ‘securities other than shares’ such as derivatives. A similar increase took place in 2008 when banks sharply increased their derivative positions due to the financial turmoil.

General government

The total net worth of the government sector decreased to -£259.3 billion at the end of 2011. Since the end of 2010, there has been a decrease of £241.7 billion in the value of financial assets, mainly due to central government’s increased liabilities in ‘securities other than shares’. The decrease in financial assets for central government has been partly offset by an increase of £48.7 billion in the value of non-financial assets, mainly due to revaluations of other buildings and structures.

Figure 2 below shows that central government’s total net worth was -£763 billion in 2011, a decrease of nearly 40 per cent on the previous year and more than four times less than its total net worth in 2006.

Dwellings

Dwellings are the most valuable asset in the UK. They have steadily increased in value in recent years, except for a fall in 2008, and are now worth over three times as much as 20 years ago. The household and NPISH sector accounts for 95 per cent of this asset’s value. The increase in the value of residential buildings was driven by changes in the market values placed on these assets. The recent slowdown in the property market is reflected by the modest increase in the value of this asset compared with recent years.

Other buildings and structures

The value of other buildings and structures increased by 5 per cent in 2011 compared with 2010. Care should be taken when comparing these data over time as changes may reflect revaluations due to reporting standards rather than real change in asset values. See background note 7 on interpreting the data for more information.

Machinery and equipment

The rise in the value of this asset has been primarily due to a £14.6 billion increase in the value of plant and machinery, continuing its rise. This has been offset by a £7.9 billion decrease in the value of transport equipment. The value of transport equipment has fallen due to the impact of the economic downturn on the shipping industry as well as the result of lower aircraft sales following the removal of the zero-rating of VAT on qualifying aircraft at the end of 2010.

Currency and deposits and loans

All sectors saw an increase in currency and deposits assets between 2010 and 2011. All sectors except government showed a fall in the value of loan assets for the same period.

Securities other than shares

These are the financial assets and liabilities with the largest value and include items such as derivatives. Activity in these types of financial products increases with uncertainty on the financial markets. The value of both assets and liabilities increased by more than 20 per cent between 2010 and 2011. This reflects the economic uncertainty.

The total net worth of the United Kingdom at the end of 2011 was valued at £6.8 trillion, an increase of 3.3 per cent from 2010. Throughout 2011 the UK economy experienced a sluggish recovery from the financial crisis and elevated inflation as a result of rising world commodity prices and VAT increases. Difficult global economic conditions also contributed to the fragile state of the economy as foreign demand for British goods remained subdued.

Households and NPISH is the largest sector of UK total net worth and throughout 2011 households faced a particularly difficult situation. Household spending power was reduced markedly as inflation increased at twice the rate of wages, reducing the amount that consumers could purchase with their income. Consumer Prices Index (CPI) annual inflation rose by 4.5 per cent while average weekly earnings only increased by 2.4 per cent.

The labour market also remained fragile, unemployment rose to 8.1 per cent in 2011 up from 7.8 per cent 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.

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 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.

Despite the poor position of households and increase in government liabilities, UK total net worth increased during 2011. That said, price pressures were strong throughout the year according to both the Consumer Prices and Producer Price indices. Therefore despite the increase in wealth, some of this might be attributed to price increases during the period as headline figures are presented in current prices.