High net worth individuals’ (HNWI) confidence in the UK economy has improved over the past 18 months, although specific challenges remain, according to the latest Saltus Wealth Index Report.

In the sixth iteration of the report, Saltus surveyed 2,000 HNWIs and found that the index level had increased from 64.4 in January 2024 to 66.9.

The index ranges between 0 and 100, with higher values describing higher confidence in, and fewer significant concerns with, the UK economy and personal finances.

The wealth management firm said this suggested that confidence levels have been gradually increasing since April 2023, but remained below the record high in February 2022 following the post-Covid bounce.

This improvement was driven by confidence in the UK economy, with 84 per cent of HNWIs now confident in its prospects, up by 6 percentage points and a record level since the research was first published in October 2021.

Saltus found that confidence increased further when respondents think about their own wealth, with 91 per cent of HNWIs confident in their own financial standings.

However, it also identified areas of concern, with “significant numbers” of HNWIs delaying key life decisions due to financial pressures, such as putting off starting a business (31 per cent) or, for older HNWIs, their retirement (25 per cent).

Respondents also highlighted the rising cost of private education as a concern, with 13 per cent of HNWIs with children at private school planning to move them into state education over the next year.

Saltus stated that this trend will be exacerbated by the government’s announcement that VAT will be added to school fees from January 2025, and just 15 per cent of HNW parents said the addition of VAT would have no impact on them or their children.

“The increase of the index in this survey is a response to the removal of uncertainty around the stability of the previous government and some more positive economic indicators recently,” commented Saltus partner, Mike Stimpson.

“However, there is still considerable anxiety among this important group around tax, inflation, interest rates, and rising costs in a number of areas, including private education.”

University of Bristol School of Economics senior lecturer, Dr Michael Peacey, added: “The index now stands at 66.9, its highest level since early 2022, a rise from the previous score of 64.4.

“This uplift in sentiment follows positive economic developments in the UK, including inflation moving closer to target levels and expectations of forthcoming interest rate reductions.

“As a result, a lower proportion of HNWIs now consider issues relating to inflation and interest rates to be significant risks to their wealth (down from 71 per cent to 60 per cent).
“This tick up in optimism is also reflected in the increasing confidence HNWIs have in both their personal finances and the broader UK economy.

“However, despite the growing optimism, there are lingering concerns. The upcoming Budget and the policies of the new Labour government are clearly weighing heavily on the minds of many HNWIs.

“Although the most significant tax announcements are still pending (the survey was undertaken in the aftermath of the July General Election), the proportion of respondents who feel their current tax burden is appropriate has already declined from 64 per cent to 58 per cent.

“There is growing apprehension about potential changes to inheritance tax and capital gains tax, which are the two taxes which HNWIs already think are the least fair.”

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