The UK national balance sheet estimates: 2013

• The National Balance Sheet is a measure of the wealth, or total net worth, of the UK. It shows the estimated market value of financial assets, for example shares and deposits, and non-financial assets, for example dwellings and machinery. Market value is an estimate of how much these assets would sell for, if sold on the market

• Without removing the effects of inflation, estimates of UK total net worth more than trebled in the 25 years from 1987 to 2012. UK total net worth at the end of 2012 was estimated at £7.3 trillion; this was equivalent to approximately £114,000 per head of population or £275,000 per household

• The main reason for the increase in the UK total net worth between 2011 and 2012 was the increase in the estimated net worth of households and non-profit institutions serving households, for example charities, universities and churches

• Non-financial corporations provided the largest downward pressure on total UK net worth between 2011 and 2012. This was mainly attributed to decreases in their estimated net worth of shares and other equity, which decreased by nearly 20%

• Dwellings were the most valuable non-financial asset in the UK. They have steadily increased in value in recent years, except for a fall in 2008. In 2012 they were 60% of the value of UK non-financial assets

• As part of the continuous improvement process, some data for previous years have been revised; further details are available in the background notes section

This annual bulletin provides estimates of the market value of financial and non-financial assets in the UK for 2012. This is a measure of the wealth of the UK and is available by sector, for example households and non-financial corporations, and type of asset, for example dwellings, transport equipment and loans. The data are used to monitor economic performance, inform monetary and fiscal policy decisions as well as for international comparisons.

Up until 2011, this bulletin was named ‘Non-Financial Balance Sheets’; it now includes both financial and non-financial assets and was renamed to National Balance Sheet in 2012.

Non-financial assets include both tangible and intangible assets. Tangible assets include:

• property

• machinery and equipment

• agricultural assets

• vehicles

• certain types of farming stocks (mainly dairy cattle and orchards)

• military equipment whose use is not solely destructive

Intangible assets include:

• computer software

• patents

• mineral exploration

• artistic originals

Financial assets include:

• means of payment, such as currency

• financial claims, such as loans

• economic assets, which are close to financial claims in nature, such as shares

Each financial asset has an equivalent liability, with the exception of monetary gold and special drawing rights.

As part of the continuous improvement process, some data for previous years have been revised; further details are available in the background notes section.

The dataset 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.

Without removing the effects of inflation, estimates of UK total net worth more than trebled in the 25 years from 1987 to 2012. Since the mid-1990s they have risen consistently with the exception of decreases during the economic downturn in 2008 and 2009.

Demand remained subdued throughout 2012. The UK was influenced by international factors such as the challenging economic conditions within the European Union and some volatility in food and commodity prices. Despite these pressures upon households and the negative contribution by general government, the total net worth of the UK increased. It should be noted that these figures are in current prices and are therefore not adjusted to remove the effect of price changes, that is inflation.

At the end of 2012, the UK was valued at an estimated £7.3 trillion, an increase of 1% from 2011, which continues the long-term upward pattern. This is in line with recent weak economic growth of the UK economy as shown by annual growth in gross domestic product (GDP) of 0.2% in 2012, following growth of 1.1% in 2011.

UK total net worth was equivalent to approximately £114,000 per head of population in 2012.

The estimated increase in UK net worth between 2011 and 2012 was £74 billion. Non-financial assets increased in value by £225 billion over the same period while net financial assets and liabilities decreased in value by £150 billion. The decrease in net financial assets and liabilities was largely due to the change in the net worth of loans in financial corporations.

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

The households and NPISH sector had an estimated total net worth of £7.6 trillion in 2012, making it the sector with the highest total net worth. This was equivalent to £288,000 per household. NPISH consists of organisations such as charities, universities, churches and trade unions, which provide services to households either free or at non-economically significant prices.

Approximately 55% of household wealth can be attributed to dwellings.

The most valuable assets in this sector were dwellings (£4.2 trillion), insurance technical reserves (£2.4 trillion) and currency and deposits (£1.3 trillion). Insurance technical reserves represent the amount that insurance companies and pension funds owe to their policy holders in the form of prepayments of premiums, and reserves against outstanding claims; the latter representing the present value of the amounts expected to be paid out in settlement of claims.

The increase in the estimated net worth of households and NPISH was the main reason for the increase in the estimated UK total net worth between 2011 and 2012. The estimated net worth of households increased by £410 billion between 2011 and 2012. In comparison, the estimated net worth for the UK only increased by £74 billion because of decreases in other sectors.

The estimated £410 billion increase between 2011 and 2012 resulted from increases in a number of different assets. The largest increase in household and NPISH net worth was in the value of dwellings, which increased by £160 billion. An increase in insurance technical reserves added an estimated £147 billion, while currency and deposits saw an increase of an estimated £60 billion.

Non-financial corporations

Non-financial corporations, which are companies other than financial institutions such as banks, had an estimated total net worth of minus £253 billion at the end of 2012. The estimated net worth of companies’ non-financial assets, such as plant and machinery and other structures, has increased steadily over time, with the exception of 2008 and 2009. The estimated net worth of their financial assets, such as loans and shares, has been more variable as companies added to or reduced the amount they owed.

Between the end of 2011 and 2012, the estimated net worth of shares and other equity owed by private non-financial corporations decreased by £220 billion or approximately 20% due to liabilities held in shares and other equity increasing more rapidly than assets. This was the largest downward pressure on estimated total UK net worth in 2012.

Financial corporations

Financial corporations, which include banks, had an estimated total net worth of £221 billion in 2012. The estimated net worth of this sector fell by nearly a third compared with 2011 but was still the second highest net worth since 1987. The net position in ‘securities other than shares’ increased for the fifth consecutive year, to £1,600 billion; this was over three times its net worth compared with the end of 2007. ‘Securities other than shares’ includes items such as derivatives. A derivative is a contract between two parties whose price is dependent upon one or more underlying assets, such as gold, wheat or exchange rates. They are used to manage risk or for speculation.

General, central and local government

General government continued to place downwards pressure on UK total net worth in 2012. However, the rate of decline eased in 2012 compared with 2011. The continued decline in net worth was due in part to the lack of a significant recovery during 2012. The resultant shortfall in tax revenue required government to issue bonds to cover spending, increasing its total liabilities and causing its net worth to decline.

Estimated central government net worth declined in every year since 2001; in contrast, estimated local government net worth increased gradually over the same period with the exception of decreases in 2008 and 2009.

The decline in central government total net worth was mainly attributed to the increased amount owing due to the number of government bonds issued to fund government spending. Because of the marked contraction of the economy during the 2008-09 economic downturn, the amount of tax collected over recent years was considerably less than spending.

The estimated total net worth of the government sector decreased to minus £305 billion at the end of 2012, meaning that government owed more than it owned in assets. Since the end of 2011, there was a decrease of £63 billion in the net value of financial assets and liabilities, mainly due to central government’s increased liabilities in ‘securities other than shares’, which includes government bonds. The decrease in financial assets for general government was partly offset by an increase of £30 billion in the value of non-financial assets, mainly due to an increase in the value of other buildings and structures.

Figure 2 below shows that, without removing the effects of inflation, central government’s estimated total net worth was approximately minus £830 billion at the end of 2012, a decrease of 7% on the previous year and nearly five times less than its total net worth in 2006.

Dwellings

Dwellings remain the most valuable non-financial asset in the UK. They have steadily increased in value in recent years, except for a decrease in 2008. In 2012 their value was estimated at £4.4 trillion, nearly four times the £1.2 trillion value in 1992, without removing the effects of inflation. The household and NPISH sector accounts for 95% of this asset’s value. The increase in the value of dwellings was influenced by changes in the market values placed on these assets.

Other buildings and structures

Other buildings and structures include non-residential buildings such as warehouses as well as other structures such as roads, railways, pipelines, bridges and sports stadiums. The estimated value of other buildings and structures has increased each year since the mid-1990s with the exception of 2008 and 2009. Without removing the effects of inflation, in 2012 these assets were worth nearly two and a half times their value in 1992.

The estimated value of non-residential buildings decreased in 2012 as a result of a decrease in commercial property prices. The estimated value of other structures increased mainly due to an increase in the value of infrastructure assets in the water and gas industries.

Machinery and equipment

Machinery and equipment includes transport equipment and plant and machinery. There has been a steady growth in the value of this group of assets since 1987, although it has grown more slowly over the period 1992 to 2012 than the other groups of assets in figure 3 below.

Without removing the effects of inflation, the estimated value of transport equipment, such as cars, lorries, trains and aircrafts, increased by 11% between 2011 and 2012. This increase was in part due to an increased number of cars purchased during 2012.

Loans

The estimated value of loan assets has increased in every year since 1987 with the exception of 2009, 2011 and 2012. The decrease in overall net financial assets and liabilities between 2011 and 2012 was largely due to the change in the net worth of loans in financial corporations.

Securities other than shares

These were the financial assets and liabilities with the largest value and include items such as derivatives. A derivative is a contract between two parties whose price is dependent upon one or more underlying assets, such as gold, wheat or exchange rates. They are used to manage risk or for speculation. Activity in these types of financial products increases with uncertainty on the financial markets. The estimated value of both assets and liabilities fell by 9% and 10% respectively between 2011 and 2012. They however remain at a level that is approximately double their 2007 value; this may reflect the continuing economic uncertainty.