Despite a weak growth in economy, UK wealth and asset management sector’s assets under management (AUM) is forecast to increase 5.1% in 2017 to £1.1 trillion, reaching £1.24 trillion in 2020, according to the EY ITEM Club outlook for financial services.

In 2016, the sector’s total AUM increased 12.3% to just over £1 trillion, which was a jump of compared to the prior year.

The share of the sector’s AUM in bonds is projected to drop from 15.3% in 2016 to 13.6% at the end of the decade. Growth in multi-asset funds is expected to be slower this year, but will total £192bn by 2019, representing a 25% surge from 2015.

EY UK financial services managing partner Omar Ali said: “The return of inflation and the resulting impact on disposable incomes could have a dampening effect on demand for financial products – a 0.3% fall in real incomes may not sound like much but it is worth £3bn to the economy.

“Despite these headwinds, this forecast should be seen as encouraging. The outlook for the UK economy is much better than many envisaged even six months ago, and compares well to other developed economies. Long-term interest rates are improving and there is a prospect of the base rate rising. Hopefully this benign economic outlook will give the industry the confidence to invest in the future and help to keep the UK industry at the forefront of the global market.”

Overall, the financial services industry in the UK is expected to record slower but continued growth up to 2020 despite Brexit and other geopolitical pressures, the report noted.