Income gaps between different regions across Britain have remained resolutely high over the past thirty years, including during the pandemic upheaval and ‘levelling-up’ agenda, highlighting the scale of the challenge facing PM-in-waiting Andy Burnham as he seeks to tackle geographic inequality, Resolution Foundation Chief Executive Ruth Curtice will say at an event later today (Wednesday).
New RF analysis launched at an event hosted by Atom Bank at its Newcastle HQ, confirms that before-housing-cost income gaps between regions and nations have remained stubbornly large between 1997 and 2023 (the most recent available data). Gross Household Disposable Income (GHDI) per person in London is – at £27,900 – three-fifths higher than Northern Ireland (at £17,300).
High inequality persists at a local level too. Disposable incomes in the highest income local area (Kensington and Chelsea) are, at £60,584, four-and-a-half times higher than the lowest (Leicester, at £13,398) – a gap that has been consistent for nearly three decades.
These gaps are deeply entrenched throughout the country. More than half (54 per cent) of the local authorities in the poorest fifth for income per person in 1997 were still there in 2023, while 82 per cent of the richest fifth of local authorities stayed in the top fifth.
These gaps have endured in recent years despite the upheaval caused by the Covid-19 pandemic, which many predicted would shift Britain’s economic geography, and the policy focus on reducing inequality via the ‘levelling up’ agenda. Instead, between 2019 and 2023, the income gap between someone living in the richest tenth of local authorities and someone living in the poorest tenth has stayed the same.
Britain’s entrenched inequality comes despite some positive living standards trends on jobs and pay.
Employment gaps – the difference in employment rate between high and low employment regions – have shrunk since the 1990s, as jobs growth has been concentrated in traditionally low-employment areas. Local pay gaps have also narrowed, with a rising minimum wage the main driver behind falling wage inequality.
Ultimately, Britain’s entrenched income divides are being driven by huge differences in economic performance across the country.
For example, the productivity of £90,000 per job in London is twice that of Conwy and Denbighshire, 1.6 times Newcastle and even 1.3 times that of the Manchester metropolitan area.
There are some areas which have bucked this low productivity trend. Manchester’s GHDI per person grew by 40 per cent in real terms between 1997 and 2023.
But despite this progress, Manchester’s recovery is far from complete. Not only was its income per person (GHDI) in 2023 two-fifths lower than London’s (£16,500 versus £27,900), it was also lower than Sheffield (£17,000), Newcastle (£17,100) and Liverpool (£17,200).
The Foundation says that narrowing these deeply entrenched gaps will require sustained investment in transport, housing, and economic development. This investment should be focused on boosting Britain’s under-performing major cities.
Other countries have done this – most notably Germany – but its post-reunification effort cost the equivalent of running a furlough scheme (around £70 billion) every year for 25 years. In contrast, ‘levelling-up’ related expenditure in 2022 was just £4 billion.
Ruth Curtice, Chief Executive of the Resolution Foundation, said:
“Britain has among the highest regional inequality of any advanced economy, and successive governments have tried and failed to reduce these income divides. The gap between rich places like Kensington and Chelsea and poor places like Leicester is just as high today as they were 30 years ago.
“There are bright spots. Employment and pay gaps have narrowed, and Manchester’s remarkable revival shows that decline is not destiny. But the UK’s major cities, once the powerhouses of national economic growth, continue to underperform.
“PM-in-waiting Andy Burnham has rightly put regional inequality at the top of his agenda. But turning ambition into reality will require investment in transport, housing and wider economic development on a scale that no recent political leader has come close to meeting. Unless that investment is taken seriously, the economic and political cost of Britain’s geographic divides will continue.”
