Interest rates could remain at a low level “for decades,” leaving savings trailing behind the cost of living, a major new report revealed.
Jim Wood-Smith, head of research at wealth management firm Williams de Broe, said returns on safe assets will struggle for much of the next ten years.
And, in another warning for the nation’s economy, Mr Wood-Smith said UK firms were failing to keep pace with emerging giants like Jaguar Land Rover parent group Tata.
The business expert predicted that UK interest rates would remain at or around their current low levels for many years, “possibly running into decades.”
As a result, savings incomes are likely to be below the rise in the cost of living of the majority of the country’s population.
“The conundrum that we all face is that the returns on ‘safe’ assets will struggle to be positive in real terms for much of the coming decade.
“In contrast, ‘risky’ assets will provide a higher and growing income stream, combined with an ever more volatile and random capital performance.
“In order for portfolios to provide returns that are more than paltry, investors must take on greater risk at a time when the volatility of equity markets is highly likely to become ever greater.
“It is a difficult circle to square.”
Mr Wood-Smith cautioned that British-based companies were not capitalising on the rapid conomic expansion of emerging markets, generating in aggregate only 13 per cent of their revenues from the developing world.
In contrast, investment into the UK by emerging market companies was booming, with nearly £83 billion being invested here last year by groups such as Tata – now the UK’s largest industrial employer thanks to its £9.6 billion investment in buying Jaguar, Land Rover, Corus Steel and Brunner Mond (formerly ICI), as well as Tetley Tea.
“Tata is just one example of the emerging market giants who are stamping their names on almost every area of business,” said Mr Wood-Smith.