Overview
From the mid-1980s to the end of the 2010s, the total stock of wealth owned by British households rose consistently. For much of the post-war period up until the mid-1980s, household wealth was worth around three times national income. Over the following decades wealth went on a seemingly inexorable rise, reaching around seven times national income in 2019. But during this period of rapidly rising wealth, wealth inequality was remarkably stable – a puzzling outcome when compared to surging inequality in the US over the same period.
This rising tide of wealth appears to have come to an abrupt halt in the 2020s. As highlighted in Resolution Foundation's previous research, the early stages of the pandemic saw the UK’s wealth-to-GDP ratio rise. But this quickly reversed, as higher interest rates and falling asset prices caused the total value of wealth to plummet as a share of GDP.
In this report, Resolution Foundation begin with an examination of the apparent puzzle of stable inequality in the pre-pandemic period, before taking a fresh look at the scale and distribution of wealth in the wake of the pandemic and cost of living crisis. The rest of the report is structured as follows:
• Section 2 covers the decades leading up to the pandemic. As well as documenting the rise in wealth over the years, we revisit recent trends in inequality, focusing on the evolution of inequalities between and within different age groups.
• Section 3 takes an updated look at how trends in household saving and asset prices have determined the path of aggregate wealth in the 2020s, and what recent changes might mean for wealth inequality.
• Section 4 concludes with analysis of how inherited and gifted wealth are set to shape the wealth distribution in future and discusses how policy should adapt to the reality of Britain’s changing wealth landscape.
This rising tide of wealth appears to have come to an abrupt halt in the 2020s. As highlighted in Resolution Foundation's previous research, the early stages of the pandemic saw the UK’s wealth-to-GDP ratio rise. But this quickly reversed, as higher interest rates and falling asset prices caused the total value of wealth to plummet as a share of GDP.
In this report, Resolution Foundation begin with an examination of the apparent puzzle of stable inequality in the pre-pandemic period, before taking a fresh look at the scale and distribution of wealth in the wake of the pandemic and cost of living crisis. The rest of the report is structured as follows:
• Section 2 covers the decades leading up to the pandemic. As well as documenting the rise in wealth over the years, we revisit recent trends in inequality, focusing on the evolution of inequalities between and within different age groups.
• Section 3 takes an updated look at how trends in household saving and asset prices have determined the path of aggregate wealth in the 2020s, and what recent changes might mean for wealth inequality.
• Section 4 concludes with analysis of how inherited and gifted wealth are set to shape the wealth distribution in future and discusses how policy should adapt to the reality of Britain’s changing wealth landscape.
Key findings
1. British wealth soared before the pandemic, but inequality was puzzlingly stable
- Headline measures of relative wealth inequality haven’t risen much over recent decades
- Flat headline inequality has hidden rising inequality between age groups since the financial crisis
- Falling inequality within older age groups has kept a lid on headline wealth inequality
2. The end of the era of low interest rates has come with a fall in household wealth
- Household saving has spiked during the pandemic and cost of living crisis
- Big changes in asset prices have had a huge effect on household balance sheets
- Higher rates are expected to reduce relative wealth inequality a little, by shrinking the gap between young and old
- Absolute wealth gaps between households have shrunk to their lowest level in a decade
3. Inherited wealth will play a major role in the future of British wealth inequality
- Despite recent falls, there is still a lot of wealth that is likely to be passed on by today’s older generations in the coming years
- Already-wealthy individuals are set to receive the largest inheritances and gifts, but their impact on inequality is complex
- Policy makers need to acknowledge the reality of persistent inequality and widening wealth gaps
- Headline measures of relative wealth inequality haven’t risen much over recent decades
- Flat headline inequality has hidden rising inequality between age groups since the financial crisis
- Falling inequality within older age groups has kept a lid on headline wealth inequality
2. The end of the era of low interest rates has come with a fall in household wealth
- Household saving has spiked during the pandemic and cost of living crisis
- Big changes in asset prices have had a huge effect on household balance sheets
- Higher rates are expected to reduce relative wealth inequality a little, by shrinking the gap between young and old
- Absolute wealth gaps between households have shrunk to their lowest level in a decade
3. Inherited wealth will play a major role in the future of British wealth inequality
- Despite recent falls, there is still a lot of wealth that is likely to be passed on by today’s older generations in the coming years
- Already-wealthy individuals are set to receive the largest inheritances and gifts, but their impact on inequality is complex
- Policy makers need to acknowledge the reality of persistent inequality and widening wealth gaps
Further reading