New Governor Warns UK Ill-equipped for Market Crash

Author: Corey McDowell - Economics Editor

Published: 24 Jan 2020

Last Updated: 2 Feb 2023


The incoming governor of the Bank of England, Andrew Bailey, has stated his concerns of asset price deflation and highlighted that investors in the United Kingdom are dangerously unprepared for any downturn in the economy.

Economic downturn

Risky Assets

Speaking in his capacity of chairman of the Financial Conduct Authority (FCA), he warned that investors are becoming unaware of the risks associated with a decline in asset prices:

“There hasn’t been a major fall in asset prices now since the [global financial] crisis and of course, we don’t want one to happen, but they do happen. I do think that there is not as great an understanding of what the consequences of that could be”

Ordinary Britons are exposed to these risks through a variety of areas, such as in pensions, the stock market and property. Of particular concern are pensions, which are particularly vulnerable to any asset price deflation due to reforms in 2014. Pension holders have traditionally bought annuities which paid a secure income, but rock-bottom interest rates have forced individuals to invest in equities and property in order to find a suitable rate of return. Coupled which a lack of understanding of the risks of these types of retirement funding, Mr Bailey strongly suggested that individuals should take responsibility for their financial decisions:

“We cannot live in a world where people think that the FCA will protect them against falls in asset values, that will not happen... People need to understand the risks they’re taking and... manage their exposure to those risks accordingly”

How many individuals are aware of the risks facing their investment pots? From the tone of Mr Bailey's comments, it seems they will not get much help from policymakers should there be another financial crisis. Not surprisingly, we at Chards advocate possessing a diverse range of assets in order to spread out risk in any savings portfolio, of which we believe precious metals such as physical gold would make an excellent addition to. The warning signals of danger ahead keep on coming from policymakers, and gold has a proven track record of protecting wealth in times of economic turmoil.

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