- UK assets under management (AUM) are forecast to record modest 3.3% growth in 2023 (equivalent to £53bn), after falling almost 12% in 2022 – the biggest annual decline since 2008
- Growth is expected to slow in 2024 to 2.1% (equivalent to £34bn), before picking up in 2025 with growth of 5.7% forecast (equivalent to £96bn – taking UK AUM to £1.8tr)
UK assets under management (AUM) are expected to grow modestly in 2023, forecast at 3.3%, after falling almost 12% in 2022 – the biggest annual decline since 2008 – according to the latest EY ITEM Club Outlook for Financial Services. Slower AUM growth of 2.1% is forecast for 2024 as sustained high interest rates constrain asset values, before picking up again to 5.7% in 2025, if, as expected, interest rates start to fall.
Equity price growth helps offset fall in fixed income assets in 2023
The value of fixed income assets has fallen over the course of 2023, reflecting a global tightening of monetary policy and investor concerns about the persistence of high inflation. However, this has been offset by modest growth in equity prices. While economic conditions have been challenging, the growth in equity prices helped drive positive inflows into UK AUM in the first three quarters of 2023, and the EY ITEM Club forecasts a 3.3% rise in AUM in 2023 (equivalent to £53b).
High interest rates to constrain AUM in 2024
The global high interest rate environment is expected to constrain bond, equity and commercial property values in 2024, contributing to a lower UK AUM growth forecast of 2.1% next year (equivalent to £34bn). However, if central banks globally begin to lower interest rates as most markets currently expect, and economic conditions begin to ease – putting households in a better position to save – inflows in AUM should be lifted. As a result, higher growth of 5.7% (equivalent to £96bn) is forecast in 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.”
Notes to editors:
UK AUM is defined as funds where 60% or more of assets are held by UK-domiciled investors.
About EY ITEM Club
The ITEM Club is the only non-governmental economic forecasting group to use the HM Treasury’s model of the UK economy. Its forecasts are independent of any political, economic or business bias and this independence is underpinned by the untied sponsorship of Ernst & Young LLP.
ITEM stands for Independent Treasury Economic Model. HM Treasury uses the UK Treasury model for its UK policy analysis and Industry Act forecasts for the Budget. ITEM’s use of the model enables it to explore the implications and unpublished assumptions behind Government forecasts and policy measures. Uniquely, ITEM can test whether Government claims are consistent and can assess which forecasts are credible and which are not.
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