UK wealth gap widens despite record household assets

A significant chasm in wealth distribution persists in the United Kingdom, despite aggregate household wealth reaching unprecedented levels. A recent analysis by the Resolution Foundation highlights a stark reality: while national coffers and individual asset portfolios have grown substantially, the ability for lower and middle-income households to ascend the economic ladder has diminished. This trend, fueled by factors such as asset price inflation and a widening intergenerational wealth gap, suggests that economic gains are disproportionately benefiting those already well-endowed, creating a more challenging environment for wealth accumulation for the majority.

UK Household Wealth Reaches Record Highs Amidst Growing Inequality

The aggregate household wealth in the UK reached approximately 7.5 times the national income by 2020-22. This surge is largely attributed to a prolonged period of low interest rates and a robust increase in asset prices, particularly within the property and pension sectors. However, this overall expansion has not translated into a more equitable distribution. The report indicates that wealth inequality has remained relatively constant since the 1980s, with the wealthiest tenth of households consistently holding around half of the nation’s total wealth. In concrete terms, the average adult in the top wealth decile possessed roughly £1.3 million more in assets than an individual in the middle decile during the 2020-22 period.

Passive Gains Amplify Wealth Disparities

A significant portion, estimated at 60%, of the pandemic-era increase in average family wealth can be attributed to “passive gains” – appreciation in asset values. These gains inherently favor individuals who already own substantial property and pension assets, thereby amplifying existing wealth disparities. The scale of the challenge for those seeking to build wealth through labor alone is considerable. An average full-time UK worker would theoretically need to save their entire earnings for 52 years to accumulate wealth comparable to someone in the richest 10%. This underscores the widening gap between income and wealth accumulation, making it increasingly difficult for individuals to improve their financial standing solely through diligent saving.

London’s Property Market Drives Extreme Wealth Concentration

The disparity in wealth is particularly pronounced in London, where the richest tenth of households hold 12 times the wealth of the median household, a ratio far exceeding that of other regions like the South East, which stands at 3.9 times. This extreme concentration of wealth in the capital is significantly influenced by its property market dynamics. Real estate ownership provides a powerful engine for wealth growth for existing owners while simultaneously raising the barrier to entry for prospective buyers who lack familial support or substantial inheritances.

Pandemic Savings Boost Unevenly Distributed, Arrears Rise for Low-Income Families

The period encompassing the pandemic offered a unique lens through which to observe household finances. While economic output declined and working hours contracted, the overall household balance sheet improved on average. This was partly due to government income support measures and a reduction in discretionary spending opportunities. Consequently, the household savings ratio peaked at an all-time high of 25% in the second quarter of 2020. However, this improvement was not uniform. Households in lower income brackets experienced considerably smaller savings increases, gaining approximately £80, compared to £4,200 for those at the top. Moreover, during 2019-20 and 2021-22, 7% of families in the bottom income quintile who had previously been free of arrears began to fall behind on bill payments, a trend not observed among middle or higher-income families.

Generational Wealth Gap Widens, Limiting Upward Mobility

Age plays a crucial role in the accumulation of wealth, and the generational wealth gap has widened significantly. The difference in typical wealth held by individuals in their early 60s and those in their early 30s more than doubled between the mid-2000s and the pandemic era, rising from £135,000 to £310,000 in real terms. In contrast, individuals currently in their early 30s have seen only a modest real wealth gain compared to their peers in the mid-2000s, approximately £8,000. This indicates a trend where older generations are accumulating wealth at a faster rate, making it increasingly challenging for younger generations to bridge the wealth gap. The analysis further suggests limited wealth mobility, with most individuals remaining within one decile of their starting wealth position over a four-year period, even after accounting for age-related wealth accumulation.

Policy Implications and Recommendations for Wealth Building

The findings from this report offer critical insights for policymakers, businesses, and households. For government officials considering fiscal policy, the distribution of wealth is as vital as its total volume. For businesses, the persistent “consumption puzzle”—why a wealthier nation might still exhibit fragile consumer spending—is illuminated by these wealth distribution trends. For households, the core message is that assets generate further assets, and without accessible pathways to homeownership, converting labor into lasting financial security becomes progressively harder. The Resolution Foundation proposes recommendations such as facilitating secure and affordable homeownership and expanding pension participation. While these measures may not entirely close the substantial wealth gap, they could potentially make the path to financial stability more attainable for a broader segment of the population.