UK household wealth rose to a record high during the coronavirus pandemic, as house prices and pension values continued to climb despite the economy contracting.
Household net worth grew 8.4 per cent to £11.2tn in 2020, its highest level since records began in 1995, according to data published by the Office for National Statistics on Thursday.
The gain compared with 3.3 per cent in 2019, and was double the average pace over the past decade, despite the UK economy last year experiencing its largest contraction in more than 300 years.
Jack Leslie, economist at the Resolution Foundation, a think-tank, said the figures confirmed the Covid crisis had “bucked” the trend of previous crises as asset prices, such as pensions and property, rose despite the hit to the economy.
The increase in household wealth contrasted with a 10 per cent contraction in 2008 during the financial crisis.
But, he added, greater prosperity had not been shared equitably, and “wealth gaps that existed pre-pandemic are likely to have been exacerbated by the crisis”.
“Unless addressed, these wealth gaps will have profound consequences for social mobility and future income inequality,” warned Leslie.
The largest contribution to household wealth came from a 7.3 per cent increase in average house prices, followed by the rising value in insurance and pensions, and bank deposits, the statistics agency said.
The rise in household assets reflected the fact that many incomes have been shielded from the effect of the economic shutdowns and had benefited from government job support schemes.
Many workers, particularly those on high salaries, were able to continue to earn while their spending fell during the lockdowns.
People’s bank savings, as a result, reached unprecedented levels during the pandemic, while more money flowed into the housing market and financial assets.
The strong demand for assets, supported by lower interest rates, boosted prices. The household net worth of dwellings reached a record high of £1.4tn, while that of equities climbed £1tn for the first time.
The value of insurance and pensions schemes increased to more than £4tn for the first time.
In contrast, the UK government’s net worth fell by £445bn in 2020, the largest fall on record, due to debts rising after it released its economic support package.
“Government financial liabilities increased significantly,” said the ONS, adding that these were “consistent with the increases expenditure” because of the coronavirus pandemic.
Richer and older groups, who tend to own more expensive properties, benefited most from the appreciation of assets, according to separate figures. The ONS data did not provide a breakdown of net worth by type of households.
The “accumulation of savings was greatest for high-income households”, the Bank of England has said.
According to the latest official figures, nearly two in three households that own a property outright are pensioners, while under-35 are over-represented in private rented dwellings.
A study by the Resolution Foundation think-tank found that as the value of wealth rose during the pandemic, “the gap between families’ wealth across the distribution have widened”.