A fall in home ownership is fuelling the return of rising wealth inequality across Britain, it has emerged.
Booming house prices in the run-up to the financial crisis had led to a decade-long fall in the uneven distribution of the country’s wealth. However, comprehensive new analysis of the UK’s wealth divisions has now found that the trend has gone into reverse.
The study by the Resolution Foundation thinktank found that just a tenth of adults own around half of the nation’s wealth. The top 1% own 14% of the total. It warned that even this figure may be an underestimate because of the difficulties in calculating the assets of the super-rich.
By contrast, 15% of adults in Britain have either no share of the nation’s record £11.1 trillion of wealth, or have negative wealth. The study found that wealth is distributed far less evenly than earnings or household income.
The thinktank measured wealth inequality using the “Gini coefficient”, with 0 being perfect wealth equality and 1 representing a society where a single person has it all. Wealth inequality was almost twice as high as earnings inequality. Despite the perception that wealth inequality has been rising for decades, the research found that the inequality of net financial and property wealth fell steadily between 1995 and 2005, with the Gini coefficient falling from 0.71 to 0.64.
The fall was driven by high and rising home ownership, with more households benefiting from the pre-crisis property price boom. As a result, the proportion of property wealth owned by the bottom four-fifths of adults grew from 35% in 1995 to 40% in 2005.
However, home ownership has been falling steadily since the mid-2000s, with the wealth held by the bottom four-fifths of the population dipping as a result. Since the financial crisis, home ownership among the least wealthy 50% of the population has fallen by about 12%. Meanwhile, it has risen by 1% for the wealthiest tenth.
The shift in property ownership further towards the richest has contributed to the widening of wealth inequality. Including private pensions, the Gini coefficient rose from 0.67 to 0.69 from 2006-08 to 2012-14.
Total wealth across Britain, which includes private pensions, property, financial and physical wealth, rose in the wake of the financial crisis from £9.9tn in 2006-08 to £11.1tn in 2012-14. This has been fuelled by rising pension wealth.
While Britain as a whole has become wealthier, the wealth of a typical adult has fallen since the financial crisis from £99,000 in 2006-08 to £84,000 in 2012-14.
Private pensions account for 40% of the wealth total – the largest share at £4.5tn. The report forms part of the Resolution Foundation’s intergenerational commission. Conor D’Arcy, policy analyst at the foundation, said: “The accumulation of wealth over the course of our lives is arguably the most important driver of lifetime living standards, and yet it has been largely ignored in the public debate. Given the hugely unequal distribution of wealth across Britain, it’s time we looked into how the nation’s wealth is divided up and what the consequences are for those who never build up assets of any significance.
“With wealth inequality now rising again, the progress of the pre-crisis period has gone into reverse.
“At £11.1tn and growing, Britain has a lot of wealth to share around. It’s vital that policy makers ensure that the key drivers of wealth in Britain today – property and pensions – are accessible to as many people as possible, young and old.”
