Households in the UK are investing less money for the future as they grapple with the rising cost of living, according to one of the country’s largest investment platforms.
AJ Bell said on Thursday that rising inflation and the war in Ukraine had knocked investor confidence and put a squeeze on household budgets, resulting in less cash flowing into investments.
Those forces resulted in lower net inflows during the first quarter of £1.6bn, compared with £1.8bn in the same three months last year, the company reported.
“Customers invested slightly less via our platform than [last year] as they assess the impact of the rising cost of living,” said Andy Bell, chief executive.
The warnings that cost of living pressures would slow the flow of cash into investments marks a sharp change of tone from last year, when investment businesses enjoyed bumper inflows as people invested money they had stashed during Covid-19 lockdowns. It is also the latest sign of the affordability crisis gripping UK households.
A poll conducted by Interactive Investor, another UK platform, earlier this month found that one-quarter of its customers had cut back on paying into their investments or savings pots because of the cost of living.
One in 20 respondents said they had stopped contributing to their pension, while 8.5 per cent had paused contributions to their stocks and shares Isa, a tax-protected UK investment account.
The slowdown in investing has been exacerbated by turmoil in financial markets, which have been unsettled by the war in Ukraine and moves by central banks to tame inflation by reducing their support for the economy. The FTSE All-Share index fell half a per cent in the first quarter, while the MSCI World index tumbled 5.5 per cent.
In contrast, stocks surged in 2021 in part thanks to central bank support, and many savers invested in the rising markets. By the end of March this year, AJ Bell’s assets under management stood at £74.1bn, up 14 per cent over 12 months, but down 2 per cent since January.
AJ Bell said last year’s influx of new money into investments “was exceptionally strong . . . whereas this year [investors] have been faced with increased market uncertainty caused by factors including inflationary pressure on the cost of living and the war in Ukraine”.
However, Bell warned that savers who pulled back from investing could also be hurt by rising inflation eroding their savings in real terms.
The Financial Conduct Authority last autumn identified 8.6mn Britons with more than £10,000 in investable cash. AJ Bell on Wednesday launched a simplified stock brokerage app, with no trading fees, called Dodl, which it hopes will appeal to these potential customers.
Source: Economy - ft.com
