Wealth gap between UK’s richest and poorest ‘turbo-charged’ by the pandemic
New report reveals that household wealth increased by £900bn
Britain’s wealth gap has been “turbo-charged” by the Covid-19 pandemic. According to a report by the Resolution Foundation think tank, total household wealth increased by almost £900bn to £16.5tn – a 6% rise on pre-pandemic levels.
In 2020 the UK suffered its “sharpest economic downturn in more than 300 years”, Reuters says. Despite this the median family saw its wealth rise by £7,800 per adult due to “asset price rises and, to a lesser extent, lower day-to-day spending”. The richest 10% gained £50,000 on average, but the poorest 30% of the population benefited by just £86 per adult.
A lack of spending opportunities and rising house prices meant wealth increased during lockdown, but the “benefits had been skewed to the richest by a ratio of more than 500 to 1”, The Guardian reports.
Jack Leslie, a senior economist at the Resolution Foundation, said the Covid-19 crisis has produced a “highly unusual combination” of a sharp reduction in economic activity, and a sharp increase in household wealth. “Many families have been forced to save rather than spend during lockdowns, while house prices have continued to soar even while working hours have plummeted,” he said.
This is the first time wealth has risen during a recession since the mid-1940s, the report revealed. Total household savings increased by £200bn, household debts (excluding credit cards) decreased by about £10bn, and house prices rose by 8%.
While the total UK wealth had risen by £900bn, the poorest households were more likely to have run down rather than increase their savings. They had “not shared in the house price boom because they were less likely to own a home in the first place”, The Guardian says.
“As a result, the rising wealth gaps that marked pre-pandemic Britain have been turbo-charged by the crisis,” Leslie said. “With policymakers facing many tough decisions in the autumn – from protecting households as unemployment rises to paying for a decent system of social care – they can no longer afford to ignore the dominant role wealth is playing in 21st-century Britain.”
The Resolution Foundation, which works to improve the lives of people on low to middle incomes, said the findings of its study should cause the government to “rethink its decision” to scrap the £20-a-week increase to universal credit in September.
Mubin Haq, chief executive of Standard Life Foundation, which supported the study, said the rise in wealth for those at the bottom “has been paltry even taking into account the £20-a-week increase in universal credit payments to those on the lowest incomes”. The announcement of the cut to universal credit risks “further widening the wealth divide which ballooned during the pandemic”.