How inequality has grown during the pandemic: Half of poorest UK families are £110 a year worse off since 2019 – while richest have £3,300 more

  • Disposable incomes of poorest 50% fell by an average of £110 in real terms
  • But richest 5% have seen gains of more than £3,300 a year
  • London has seen six-fold faster growth in incomes than the north east.

According to new research, inequality has worsened in Britain due to the pandemic. Wealthiest families and areas are now getting wealthier, while those living in poverty have become ever more isolated.

The poorest half of the population have seen their disposable incomes fall by an average of £110 in real terms since the Christmas before the Covid-19 pandemic. 

At the same time, the richest 5 per cent have seen gains of more than £3,300 a year, according to research by the New Economics Foundation (NEF) think-tank.

Incomes of the poorest have been squeezed, while the richest have had runaway growth

The incomes of the most vulnerable have declined while those who are the wealthiest enjoy a rapid growth rate

Due to this, 300,000 more people are now in poverty. This is defined by families who earn 60% less than the UK’s median household income.

According to the report, incomes in London and other regions have increased six times faster that those in the North East, which has barely seen any growth over the last two years.

NEF stated that, although measures like the furlough plan protected millions, it was more important to ensure the safety of those in less secure jobs. This leads to greater inequality.    

And those with no work, particularly since the cut of the £20 universal credit uplift, have been left ‘uniquely exposed’ to the cost of living squeeze.

The NEF stated that people working in high-paying jobs are relatively protected from the negative effects of the pandemic.  

This is due to the fact that such individuals are more likely to invest and have thus benefited from continued growth of international stock markets, even though inflation has slowed down activity in other parts of the global real economy.

The think tank has raised concerns about the effectiveness of the government’s much-promised ‘levelling-up’ plan, which seeks to raise standards of living in areas that are ‘left behind’.

The  gap in income across regions has widened since the 2019 general election

The  gap in income across regions has widened since the 2019 general election

Alfie Stirling, director of research and chief economist at NEF, said: ‘These results show that the government’s handling of the pandemic has led to the richest families and regions getting richer, while the poorest families are even poorer. 

Families that are already suffering the greatest could find it more challenging to survive with rising prices, increased interest rates, and continuing effects from Brexit.

“Any plan to address these issues must, over the long-term, recognize the main drivers behind regional inequalities of people, places and industries. 

“But, in the short-term, it is important to do more for families using the social security system.”

Those without work were hardest hit, but with large variance between regions

The hardest were those without work, although there was a lot of variation across regions.

According to the research, single parents are the only type of family that has seen an increase in real estate across all areas.

However, those in Yorkshire and the Humber, and the north-west and Merseyside saw their real incomes fall by around 15 times as much as in London. 

This report is coming as separate research shows that some of the most at-risk financial groups like single mothers or carers have seen their pension savings gaps worsen during the pandemic.

The NEF is calling for a ‘living income’ that would set an income floor below which no one could fall and that is sufficient to meet everyday needs, like the weekly shop or an emergency boiler repair.

A spokesperson for the Department for Levelling Up, Housing and Communities said: ‘In addition to the £4.8billion Levelling Up Fund, we’re providing record investment in infrastructure worth over £96billion, £12billion in affordable housing and a £2.6billion Shared Prosperity Fund to help rebalance opportunity across the UK.

‘We are widening access to new jobs – 56,000 just this year – and we’re building on that through a £200million boost to communities to help build skills. 

“The Levelling Up White Paper” will detail how the government will improve the opportunity for all citizens to have better lives after the pandemic.