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New global forecast reasserts the pre-eminence of G7 as natural home of the super rich over the next decade

The extravagant exploits of Russian, Indian and Chinese oligarchs may be making a splash in the West, but a new report published today reasserts the pre-eminence of the developed markets as the primary breeding grounds for tomorrow’s wealthy. Barclays Wealth Insights, a new ongoing series of reports developed by the Economist Intelligence Unit (EIU) on behalf of Barclays Wealth, the wealth management arm of Barclays, finds that the significance of the emerging BRIC markets (Brazil, Russia, India and China) as a source of the rich and super rich is “overplayed”. As the numbers of wealthy individuals continue to grow at pace across the globe, the report reveals that the vast majority of millionaires and super millionaires will continue to come from developed markets, which will be the primary beneficiaries of what it terms “a seismic shift in the landscape of wealth”. The new findings from the first volume of Barclays Wealth Insights, are based on a new forecast developed by the Economist Intelligence Unit specifically for the report to provide for the first time a detailed prediction on the growth of wealthy individuals over the next decade.  The ranking charts the growth in financial wealth (investments and savings) and non-financial wealth (property and land) among G7 households and is supported by EIU’s Business Environment Ranking data and a panel of wealth experts, drawn from academia, industry and financial circles to provide unique insights into trends driving wealth creation.    New ten-year ranking In the EIU-generated forecasts of the numbers of wealthy within G7 nations over the next 10 years, all seven countries will see the number of high net worth individuals – those with financial wealth in excess of $1m (£526,900) – double over the next decade. In the UK, Japan and Germany, these numbers will more than triple and Canada will enjoy almost a six-fold increase in its millionaire count. The UK and Germany will race to become the first European G7 country to play host to a million dollar millionaire households over the next decade. According to the report, Germany will score a narrow victory, achieving the landmark in 2016. By this time, the UK will be home to 940,000 financial millionaires (and will reach one million in 2017). When total wealth – including non-financial wealth such as property – is considered, the rate of growth slows across all countries, suggesting that the rate of growth in house prices will be slightly lower than that of other, financial assets. With property included, the UK emerges as the country with the densest concentration of wealthy households. More than a quarter (26 per cent) of all UK households – 6.9 million – will be worth in excess of $1m by 2016. And in terms of total wealth per capita, the UK is edged out only by the US – with the average person in the UK worth $332,388 by 2016, compared to $333,989 in the US. “Much is made of the ‘BRIC effect’, but this research with the EIU shows that the developed nations will continue to be home to the majority of the world’s wealthy,” said Mark Kibblewhite, Managing Director of Barclays Wealth’s private banking division. “BRIC oligarchs like Roman Abramovich and Lashkmi Mittal will continue to exert their influence in G7 countries precisely because they understand the stability, security and potential these parts of the world offer wealthy people. “In the UK, taxation policy is relatively generous, the business infrastructure is world class and the culture is diverse and welcoming – it is a perfect location for the rich and super rich to base themselves,” said Mr Kibblewhite. The point is supported by the EIU’s unique Business Environment Ranking, which uses a range of measures to assess how conducive a country is to business (and with it wealth) development.  The USA, Canada, UK, Germany and France are all registered in the top 20 (with Japan and Italy just outside) but in contrast, Brazil is 44th, China is 51st, India 58th and Russia 59th. “The BRIC markets have seen less significant growth in recent years, but all four countries face challenges in developing their business environments so that they are more welcoming to business and enterprise,” said Rob Mitchell of the EIU. “While larger corporates are right to invest in the BRIC countries, they should not expect quick results and should consider these investments as long term. In the shorter term, the G7 countries will continue to present major opportunities for wealth generation and cannot be ignored,” said Mr Mitchell. Additional ‘Insights’ The argument is borne out in the views of the insight panel included in the report.  Talking of China, Aaron Simpson, Chief Executive of Quintessentially, a company that provides services to the wealthy explains: “It is incredibly difficult doing business there because of cultural differences.  They will give you plenty of face time and tell you yes, but then nothing happens.  People think they have done business but then walk away without a deal.” Phil Beresford, complier of The Sunday Times Rich List: “China is putting a huge amount into infrastructure, but not as much as education.  Its ability to keep going is based on cheap, low-cost manufacturing, which may not be the model for a longer term future.” Rob Mitchell at the EIU believes that Russia is equally challenging: “Despite the country’s vast natural resources and good GDP growth, long-term forecasts are less promising.  Russia has a rapidly ageing workforce, and its huge size is a major economic disadvantage since it implies long distances between populations, natural resources and business centres.  This, coupled with a difficult climate for foreign investment means investors should approach any Russian investment with great care.” The next volume of Barclays Wealth Insights will be published in early 2007. ENDS