This article continues an annual series, providing an inventory of external assets and liabilities. Net external assets increased very rapidly in 1982, and have more than doubled in the last two years. The increase was much larger than the measured balance of payments surplus on current account, the difference being largely explained by changes in the value of existing assets and liabilities.
The article sets the recent rise in its historical context, examining the main influences on the value of external assets and liabilities since 1.970. These influences include the impact of movements in exchange rates and asset prices, the separate contributions of flows of new investment and of rein vested earnings, and the consequences of the development of North Sea oil and gas and of the abolition of exchange controls.
The main developments in 1982 were:
- Valuation changes-in which sterling's decline against the dollar was an important factor-sharply increased gross assets and liabilities measured in sterling, and also raised net assets by around £7-8 billion.
- The current account surplus of over £4 billion, with its corresponding net capital outflows, accounted for less of the rise in net assets than in 1981.
- After revaluations, the stock of private net portfolio investment rose by £12½ billion, more than accounting for the rise in total net assets. Just over half the increase arose from valuation changes: net acquisitions, at £6 billion, were partly a continuing effect of the abolition of exchange controls.
- Net direct investment abroad also rose, by almost £3½ billion.
- Net banking and other commercial liabilities rose by nearly £5¾ billion, acting as an important offset to the total rise of nearly £16 billion in net in vestment assets.