UK left exposed to Brexit fallout as nation’s wealth surplus plummets from £469bn surplus to £22bn deficit

The revision to the national accounts in the ONS’s so-called ‘Blue Book’ means that the UK’s net international investment position has collapsed and the country owns far fewer international assets and owes far more to foreign investors than previously thought.

The effective writedown in the value of “UK plc” could make it harder to defend sterling and the British debt markets against a run on the pound after Britain leaves the European Union.

The shocking new official data essentially shows that the UK no longer has a reserve of net foreign assets, while the nation’s stock of wealth has collapsed from a surplus of £469 billion to a net deficit of £22 billion.

Gemma Godfrey from Investment website Moola explained: “We thought they were in £469 billion of surplus, but actually we have a £22 billion deficit.

“That equates to a quarter of the value of the UK market in total.

“The reason behind this is that foreign direct investment in companies has fallen and our reserve of foreign assets is much smaller than we thought as well.

“The Office of National Statistics have redone the figures and they are much lower than we thought.

“The reason why this has been offset is two things. First of all, foreign investment has been slightly supported by existing commitments, so it hasn’t really fallen down until recently.

“And secondly, people have been buying a lot of sterling because they thought the pound was going to rise. But again, that’s quite fickle.

“Half a trillion pounds has gone missing,” said Mark Capleton, the UK rates strategist at Bank of America.

Meanwhile, the Bank of New York Mellon, the world’s biggest custodian of assets, said there had been a marked deterioration over recent weeks in purchases of sterling stocks and bonds by ‘real money’ players such as pension funds and sovereign wealth funds.

Simon Derrick, the bank’s currency strategist, said: “The outflows from the UK began in mid-August. The big buyers are disappearing.”

The consequences of Britain’s current lack of financial reserves has already caused commentators to warn that the UK no longer has foreign assets to help protect against any damage to the economy from Brexit and may weaken its position in the ongoing divorce negotiations with the EU.

The news comes as the Brexit talks in Brussels reach a crucial stage.

Treasury officials are already braced for “gloomy” OECD forecasts which are due to give its two-yearly update on the state of the UK economy today.

Ms Godfrey of Moola added: “The reason this is important is that it removes our safety net and also puts us in a weaker position when we’re going into Brexit talks.”