The Scale of Economic Inequality in the UK

UK Income Inequality

The UK has a very high level of income inequality compared to other developed countries.

The majority of households in the UK have disposable incomes below the mean income (£34,200 as of 2018). This includes wages and cash benefits, and is after direct taxes like income tax and council tax, but not indirect taxes like VAT. The median income has been rising by 2.2% on average for the last five years. Most of this is accounted for by the rise in average income for the richest fifth, which has increased by 4.7%. The poorest fifth, on the other hand, have seen a fall in income by 1.6%.1

In 2018, households in the bottom 20% of the population had on average an equivalised disposable income of £12,798, whilst the top 20% had £69,126. As can be seen from the graph below when original incomes are compared, the difference is even more striking: the richest fifth had an income more than 12 times the amount earned by the poorest fifth.2

Original, gross and disposable income by quintile group for financial year ending 2018. Households are ranked by their equivalised disposable incomes, using the modified OECD scale.

Differences Within the Top 1%

The graph above does not show the full extent of the difference between the richest and the rest of society. This is because the top 1% have incomes substaintally higher than the rest of those in the top 10%. Since 1980, the share of income earned by the top 1% in the UK has generally been rising, peaking to 13% in 2015. This is almost double the corresponding figure for Belgium (7%) and still higher than Australia (9%), Sweden (8%) and Norway (8%), to name a few. For the whole world, the top 1% earn 20% of the total income.3

How Income is Shared

The graph below shows how income is shared amongst households. The poorest fifth of society have only 4% of the total income, whereas the top fifth have 47%.

Income share by quintile group for financial year ending 2018, ONS

The redistributive effect of taxes and benefits is felt most significantly in retired households, where disposable income inequality is lower than non-retired households. Retired households' Gini for disposable income is 28.5%, whereas for non-retired households this figure is 32.8%.4 Most of the increase in retired households’ income since end-1970s has to do with the seven-fold rise in private pension income in this period.5

GB Wealth Inequality

Wealth in Great Britain is even more unequally divided than income. In 2016, the ONS calculated that the richest 10% of households hold 44% of all wealth. The poorest 50%, by contrast, own just 9%.More than that, for the UK as a whole, the WID found that the top 0.1% had share of total wealth double between 1984 and 2013, reaching 9%.

The graph below shows how wealth distribution has changed since the last century for the top 10%, who have consistenlty held the majority of wealth.

Wealth Spread Between Great Britain's Regions and Nations

Wealth is also unevenly spread across Great Britain. The South East is the wealthiest of all regions with median household total wealth of £387,400, over twice the amount of wealth in households in the North West (£165,200).

Aggregate household wealth by region for 2014-16, ONS: Wealth and Assets Survey, 2018

Wealth

The UK's wealth distribution is roughly average compared to the other OECD countries. The UK has a wealth GINI coefficient of 73.2%.

Wealth Gini coefficient, World Economic Forum: The Inclusive Development Index 2018 

Over 50% of UK’s adult population has more than USD 97,169 wealth, as of 2018. With its 2.4 million dollar millionaires, the UK is home to more than 6% of all millionaires globally. 7

Income

Compared to other developed countries the UK has a very unequal distribution of income, with a Gini coefficient of 0.35. According to 2013 data from 19 OECD member states in the Luxembourg Income Study data set, the UK is the fifth most unequal, and fourth most unequal in Europe.

 

Gini coeffient by country, 2017 or latest available, OECD