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 (or net) incomes in the £17,000-18,000 bracket (this includes wages and cash benefits, and is after direct taxes like income tax and council tax, but not indirect taxes like VAT), well below the median income level (£27,300) in 2017. Though the median household disposable income is growing at an average rate of 2.1% per year since 1977, this meant only a £600 rise from 2016 to 2017.1
In 2017, households in the bottom 20% of the population had on average a disposable income of £12,478. The top 20% had net incomes over five times that (£65,542). As can be seen from the graph, income inequality is much starker amongst original incomes than disposable incomes with the poorest 20% having on average an original income of £7,383 and whilst the top 20% have an original income almost 31 times larger (£88,776). 2
Original, gross and disposable income by quintile group, Office for National Statistics, 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 substantially higher than the rest of those in the top 10%. In 2012, the top 1% had an average income of £253,927 and the top 0.1% had an average income of £919,882. 3
How Income is Shared
The graph below shows how income is shared amongst households in 2016. The poorest fifth of society have only 8% of the total income, whereas the top fifth have 40%.
The redistributive effect of taxes and benefits is felt most significantly in retired households, where disposable income inequality is lower than non-retired households. In 2017, retired households Gini for disposable income was 28% whereas for non-retired households this figure was 32.5%.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. The richest 10% of households hold 44% of all wealth. The poorest 50%, by contrast, own just 9%.6
Percentage of total wealth in Great Britain, Wealth and Assets Survey, July 2014 to June 2016, Office for National Statistics.
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 £380,600, over twice the amount of wealth in households in the North West (£163,000).
Median household total wealth by regions, Office for National Statistics.
How Does the UK Compare to Other Countries?
The UK's wealth distribution is roughly average compared to the other OECD countries. The UK has a wealth GINI coefficient of 73.2% compared to an OECD average of 72.8%.
Over 50% of UK’s adult population has more than USD 100,000 wealth in 2017. With its 2.2 million dollar millionaires, the UK is home to more than 6% of all millionaires globally. 7
James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2017
Compared to other developed countries the UK has a very unequal distribution of income. 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, 2013 – Luxembourg Income Study (LIS)
*LIS holds more recent single-country data for some countries listed in the graph above, however, 2013 is the most recent year from which the largest number of OECD-country data can be drawn.