Following a significant contraction in 2022, the UK’s assets under management (AUM) are poised for a modest recovery in 2023.
A 3.3% growth, adding £53 billion to the AUM, is projected, marking a slight recovery from the previous year’s nearly 12% decrease, the most substantial annual drop since the financial crisis of 2008.
This information emerges from the latest EY ITEM Club Outlook for Financial Services.
Despite the challenging economic conditions and the decline in fixed-income asset values amid global monetary policy tightening, a slight increase in equity prices has contributed to the anticipated growth in AUM.
The rise in equity has been sufficient to encourage positive inflows into the UK AUM throughout the initial three quarters of 2023.
Looking ahead, 2024 is expected to see a deceleration in growth to 2.1%, attributed to £34 billion, with high interest rates continuing to impede asset values.
Nonetheless, there is an optimistic outlook for 2025, with stronger growth of 5.7% projected, equivalent to £96 billion, should interest rates start to decline as forecasted, potentially easing economic conditions and enhancing household saving capacities.
This upturn could elevate UK AUM to approximately £1.8 trillion by the end of 2025.
Dan Hall, UK wealth and asset management leader at EY, comments: “2022 was one of the most challenging years the UK asset management sector has seen in recent times. This year, as the economic outlook remains weak, asset management firms are faced with ongoing challenges, and their plates remain undeniably full as they look to balance low growth and profitability struggles with forward-looking priority areas, including delivering on ESG commitments and keeping pace with tech advancements and regulatory change.
“While some green shoots of recovery over the summer is positive to see, economic conditions continue to be challenging, and with only modest growth expected this year – and even less in 2024 – the pressure to reduce cost bases and accelerate digital transformation to drive efficiency remains high.”
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