Britain’s wealth gulf has been laid bare in new research by the left-leaning Resolution Foundation think-tank. Its latest findings focusing on the period from 2020 to 2022 suggest the average worker in Britain would need to accumulate 52 years of full earnings to move from the middle to the top wealth bracket.
This equates to £1.3million in accumulated income, and is a marked deterioration from 2006 to 2008 when the same journey required 38 years of median wages. With the data focusing on 2020 to 2022, interest rate rises over the last couple of years may, at some point, be found to have thrown some of its conclusions and trends ‘into reverse’, the think-tank said. However, it added: ‘Great Britain continues to exhibit high and persistent wealth inequality, with mobility limited’.
The data has emerged at a time when millions of Britons are struggling with sluggish wages, job cuts and rising costs for essentials like food, accommodation and utilities. The Resolution Foundation’s analysis showed that even if a typical full-time employee could save every penny earned over their entire career, they would still fall short of reaching the top of the wealth distribution ladder. Since the pandemic, wealth gaps between rich and poor families have ‘grown sharply’, the Resolution Foundation said.
Alongside passive gains from rising asset values, wealth growth during and since the pandemic has been driven by a surge in household saving and substantial debt repayments, as lockdowns, travel restrictions, and social distancing curtailed spending opportunities. In its report called Before the fall, senior economist Molly Broome and research associate Ricky Kanabar concluded that most people’s wealth tends to be ‘sticky’. Most people move no more than one decile above or below their starting wealth position over a four-year period, the report said.
The report added: ‘Low-to-middle income families are less likely to experience upward mobility: almost half (45 per cent) of people from higher-income families moved up the wealth distribution at least one decile between 2016-18 and 2020-22, compared to only 40 per cent among their low-to-middle income counterparts.’ The £1.3million figure used in the report is, according to the Resolution Foundation, the gap between a household in the middle of the wealth distribution and one in the top ten per cent. The think-tank has broken down the figure as a multiple of average annual earnings to help illustrate the difficulty of earning a way into wealth in Britain today, compared to previous years before house prices took off and home ownership rates fell.
‘Entrenched’ wealth gaps across Britain mean that who your parents are has, according to the think-tank, grown in importance, with families who already have assets benefiting disproportionately from a wealth boom. Wealth ‘inequality’ between different age groups also remains an issue, the think-tank said. Its analysis suggested that the wealth gap between people in their early thirties and people in their early sixties had more than doubled between 2006 to 2008 and 2020 to 2022, from £135,000 to £310,000 in real cash terms. The Resolution Foundation added: ‘Wealth is also unevenly distributed between regions, with median wealth per adult in 2020 to 2022 standing at £290,000 in the South East, compared to just £110,000 in the North East.’
In London, the wealth gap is stark. A combination of high house prices and low home ownership rates mean that families at the top held twelve times more wealth per adult than those at the middle, compared to a gap of 5.2 across Britain as a whole. Crucially, however, the report concluded that rises in interest rates over the last couple of years ‘have brought four decades of increasing wealth to an abrupt end, potentially throwing some of the trends discussed in this report into reverse.’
For its latest report, the Resolution Foundation used the latest data available from the Office for National Statistics Wealth and Assets Survey. Broome, of the Resolution Foundation, said: ‘Wealth mobility in Britain is low – people that start life wealthy tend to stay wealthy, and vice versa. ‘Rising house prices and changes in the value of pensions account for most of the growth in wealth gaps since the early 2010s, rather than any active behaviour on the part of individuals, such as buying homes or acquiring new assets.
‘Soaring wealth and an acute need for more revenue has prompted fresh talk of wealth taxes ahead of the Budget next month. ‘But with property and pensions now representing 80 per cent of the growing bulk of household wealth, we need to be honest that higher wealth taxes are likely to fall on pensioners, southern homeowners or their families, rather than just being paid by the super-rich.’
Omer Mehmet, managing director at Welling-based mortgage broker Trinity Finance, told the news agency Newspage savers need to turn into investors in a bid to build their wealth.
Mehmet said: ‘Saving alone won’t make you wealthy anymore – not in an economy where inflation outpaces interest and asset growth does the heavy lifting. The report proves that real wealth now comes from ownership, not income. Property, pensions and investments are what move the dial, but too many people are locked out of those opportunities. The focus shouldn’t just be on saving harder, it should be on helping ordinary workers invest smarter — turning savers into owners.’
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