Inequality Widens in Britain

Inequality is escalating among UK households with the difference in financial fortunes between low and high income families becoming more apparent over the past year, according to research.

Families are dealing with increased financial pressure from stalling incomes and limited savings, combined with rising debt and inflation fears, according to Aviva’s latest Family Finances Report published Monday, ThisIsMoney reported.

The savings gap between low and high income families has increased 25% year on year, from £50,072 ($62,346) in 2015/16 to £62,790 in 2016/17.

Low income families now have typically £95 ($118) in savings; compared to £136 only last year. High income families have increased savings as high as £62,885. This broadening gap is likely to have been an impact of monthly family incomes falling to a two-year low of £2,006.

Meanwhile, one in four UK families is classed as low income, while less than one in ten fall under the high income classification.

A managing director from Aviva UK, Paul Brencher said, “The gulf between low and high income families is showing signs of widening, in a worrying indication that those less fortunate are finding their finances increasingly stretched.” While high income families have been able to increase their savings pots, those with low incomes have seen theirs fall to less than £100. 

Without a financial back-up, any sudden unexpected expense could put low income families in particular under added pressure.

Aviva’s research suggests UK families who own their own home (64%) is now at the lowest point in four years. Low income families are least likely to be homeowners (41%), down from 43% a year ago.

In contrast, 90% of high income families are homeowners, up from 88% in winter 2015/16. This could be a sign of difficulties getting a mortgage for first-time buyers or families not considered ‘prime’ borrowers. With incomes dwindling, others may be struggling to raise a deposit.

Brencher said, “Although mortgage rates are at record lows, qualifying for these deals and getting a deposit can be difficult for those with limited household income or unusual circumstances. Britain’s broken housing market means becoming a homeowner is a distant dream for many families and government plans must swiftly be turned into action to stem the tide of inequality.”

Rising prices are among families’ greatest fears for the financial future with more than 43% experiencing increases in the price of basic necessities up from 36% last summer.

This fear looks justified given that consumer price inflation rose to a high of 1.8% in January–a level not seen since three years ago.