According to new study, the typical employee in the UK would need half a century of salary to achieve the net worth of the most affluent 10% nationwide.
Widening Financial Divide Across Decades
The study examined wealth distribution data from the 2020-22 timeframe and determined that back in 2006-08, it would have needed 38 years' worth of typical employment income to enter the top 10th of the wealth distribution.
A senior economist part of the analysis stated: "Wealth gaps in Britain are now so large that a regular employee setting aside their entire income throughout their career would continue to be incapable to reach the top of the financial hierarchy."
Quantifying the Wealth Divide
The research discovered that the difference between the net worth of the average person and someone in the wealthiest decile was £1m in the pre-crisis period, but had increased to £1.3 million in inflation-adjusted terms by recent times.
The analyst further stated: "These gaps are particularly worrying as financial progression in Britain is limited – those who commence life well-off tend to continue being rich, and conversely applies."
Comparative Financial Divide
Even with the wealth gap expanding in absolute terms, the share of total wealth in the UK held by the most affluent homes – termed "comparative financial divide" – has been "mostly consistent since the 1980s era," as stated in the study.
Throughout these years, complete net worth in the UK rose substantially from three times the annual GDP, to almost 7.5 times.
Drivers of Wealth Inequality
So-called "unearned" gains, through growing real estate costs and changes in retirement fund assessments, were the main drivers of the growing financial disparity from 2010 onward, per the report.
These increases typically went to elderly homeowners, the research shows – worsening the intergenerational wealth divide.
Intergenerational Financial Divides
The median economic difference between individuals aged 30-34 and those in their early 60s grew by more than 100% in actual value, from £135k in the mid-2000s, to 310 thousand pounds.
Regional Disparities
Furthermore, the study revealed stark area-based disparities, with the average level of wealth in 2020-22 amounting to £290,000 in south-east England, where property prices have typically increased quickly, compared with 110 thousand pounds in the NE of England.
Pandemic Period Impact
Amid the health crisis, when millions of workers were protected by the taxpayer-backed furlough scheme, and Covid shutdowns curtailed consumption options, the information reveals numerous families were in a position to set aside money, enhancing their financial standing.
Higher-income households achieved superior outcomes, however. "The median home in the lowest-income quintile saw their cash reserves grow by only eighty pounds throughout the health crisis (2019-20 to 2021-22), approximately equivalent to the two years pre-pandemic. On the other hand, the average household in the highest income quintile saw their cash reserves increase by £4,200," the report finds.
