Wealth in Europe at Record High

Swiss bankers have released data showing that wealth in Europe rose 1.7% in 2013, exceeding the peak recorded prior to the 2007-2009.....

Swiss bankers have released data showing that wealth in Europe rose 1.7% in 2013, exceeding the peak recorded prior to the 2007-2009 downturn.

European wealth is currently around the record level of €56tn, expected to reach a massive €80tn by 2019.

Private Swiss bankers Julius Baer's recently published inaugural "Wealth Report: Europe" shows that despite recent concerns about economic malaise, Europe has maintained its role as one of the wealthiest regions in the world.

Germany, Britain, France and Italy accounted for almost three-quarters of total net wealth, which is defined as gross financial assets, minus debt plus real assets.

Luxembourg has wealthiest households

Wealth levels per adult were highest in Luxembourg where the average adult holds more than €400,000 compared with the European average of €167,100.

The financial crisis took its toll mainly in Spain and Greece where around €1.4tn of wealth has been eliminated since 2007, according to the data. Average wealth per adult in Spain is estimated to amount to €92,300 and €58,900 in Greece.

The report also found that more than two-thirds of Europe's wealth lies in the large core countries Germany, United Kingdom, France and Italy. Core Europe also has the largest number of wealthy households with Germany boasting 1.4m millionaire households, France with 1.3m, Italy 818,000 and the UK 796,000.

Concerns were also raised that more wealth is becoming concentrated in fewer hands. Julius Baer's report revealed that more than half of the total wealth in Europe is held by the wealthiest 10% of households.

Increasing disparity between rich and poor

Julius Baer's Chief Investment Officer, Burkhard Varnholt said: "It is important to understand that excessive inequality slows a country's economic growth and weakens aggregate demand. The wealthy should consider investment opportunities that have clear social benefit to help inequality and youth unemployment."

The report also observed the role family businesses play in building wealth, observing that many of Europe's most enduring family-led companies remain well-positioned to drive economic progress (and family wealth) in the 21st century. Co-author of the report Robert Ruttman said, "As long as capital returns exceed economic growth rates in Europe, European families owning capital are set to gain a larger slice of Europe's consistently expanding wealth cake."

Wealthy should choose socially responsible investments

Julius Baer's Dimitri Bellas added, "This trend should have a number of implications ranging from the wealth effect driving up the demand for (and prices of) luxury goods, to the growing importance of intergenerational wealth transfers, both in terms of scope and complexity."

The report shows that the average prices of luxury goods such as expensive wines, designer handbags and sports cars are rising at least twice as fast as inflation, up 38% since 2004 compared to 18% for European inflation.

- Monday 06 October 2014

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