UK Inequality Carries On

A booming City and rising house prices provided a double boost to Britons holding assets in 2016 as they pushed the nation’s wealth through the £10tn mark, according to a new survey.

Lloyds Bank’s private banking arm said total household wealth in the UK increased by £892bn last year – with the property and financial markets each responsible for half the rise.

News of the 9% jump in the value of the assets from £9.6tn to £10.5tn during 2016 is likely to rekindle the debate about the UK’s wealth inequality. Previous surveys have shown that a tenth of adults own half the nation’s wealth, while 15% own nothing or have negative wealth.

Lloyds said the value of assets had risen far faster than prices or incomes over the past decade. The £3.9tn increase in the value of residential property and financial assets owned by UK residents represented a 59% rise, whereas prices rose by 39% and gross household income was up 37%. Other surveys have come up with higher estimates of total household wealth, but Lloyds said its figure excluded non-residential property and assets held by charities and other non-profit institutions.

The survey said average house prices rose by 4.9% during 2016 and an additional 183,000 homes were added to the stock of private properties to buy and rent. This resulted in housing wealth contributing an estimated £431bn to the overall increase in wealth. The total value of financial assets – such as bank and building society deposits, government bonds, shares in companies, life assurance and pensions held by households – increased by a £461bn, or 8%.

The Bank of England has acknowledged that the richest 10% of Britons gained most from the money creation programme known as quantitative easing, since the increase in the supply of credit boosted demand for financial assets. Since the better off held a greater proportion of these assets, 40% of the gains of rising share and bond prices went to the richest 5% of households.

The Social Market Foundation said more than 14 million working age adults were not saving at all, and more than 26 million adults did not hold adequate rainy day or pension savings.

Russell Galley, the managing director of the Halifax bank, said, “The rise in the employment level by 175,000 in the three months to May helped push the unemployment rate down to 4.5%, the lowest since June 1975. However, this improvement in the jobs market has not, as yet, boosted wage growth, resulting in earnings rising at a slower rate than consumer prices,” he said.