Dwindling millionaires

(By Richard Holway 8.00am 27th May 09) I have long believed that the most important driver in both boom and bust is ‘confidence’ not ‘cash’. You might well be earning the same or more than you did two years ago, but if you fear for your job now you will clearly be spending less and saving more.

So surveys of business or consumer confidence are important. As such the indicators look good with confidence levels stabilising – hopefully they will start rising soon. Today the CBI quarterly survey of confidence in the Services Sector (which covers c75% of UK output and most of the SITS areas we report on) 'showed that the scale of the slump in business has slowed and sentiment has picked up". Enterprises "were the least downbeat since Nov 2007". Confidence needs to pick up if GDP growth is to return in H2 2010 as we currently predict - although that is later than Alistair Darling’s Q4 2009 recovery ‘hope’.

I have growing empathy with Sir Philip Green (Bhs etc) who said "We are all fedup with being fedup".

But one historic tracker that has turned very negative is the number of millionaires in the UK. According to the Centre for Economic and Business research the Number of Millionaires has halved in the last year – from 489,000 to 250,000. A millionaire is defined as someone with a million pounds worth of assets – including cash and properties - minus their mortgage and other borrowings. The main reason is the c18% fall in house prices over the last year.

Given that most new companies – specifically IT - are started with some kind of ‘angel’ investment (usually from ‘family and friends’), it’s not a good sign for ‘green field’ startups funded in that manner.