• Before the pandemic, typical wealth per adult stood at £310,000 for families in the South East and more than £200,000 in the South West and East of England. This is much higher than in Scotland (£140,000) and the North East (£99,000). London stands out from its surrounding regions, with the second-lowest typical family wealth per adult of any nation or region (£115,000).
• Incomes, demographics and house prices together largely explain the differences in levels of wealth and their composition around the UK. Unsurprisingly, differences in household incomes around the country reflect variation in the scope for them to build up wealth.
• Since household wealth has a strong lifecycle pattern as people prepare for retirement, small differences in the age of the population in different regions and nations drive variation in typical wealth holdings. With a median age of 35, London is substantially younger than all other nations and regions, which partly explains its surprisingly low typical wealth.
• Households in areas with low house prices tend to hold a much greater proportion of their wealth in pensions, with Scottish households near the point of retirement having 20 per cent of their wealth in housing versus 42 per cent in London. This implies that standards of living in retirement tend to be more similar across the country than the variation in total wealth would suggest.
• Surging interest rates since 2022 have triggered a sharp reversal in wealth levels across all parts of the UK. As a proportion of total household wealth Scotland, Wales and the North of England have seen the biggest drops of between 24 and 26 per cent. This reflects the larger proportion of wealth in these areas held in pensions, whose underlying assets have been hit hardest by rising interest rates. Meanwhile in the South and East of England, relatively resilient house prices have limited the wealth shock there so far. This could change as house prices come to reflect persistently higher mortgage rates.
• Recent trends show how exposed households are to high asset price volatility that redistributes wealth arbitrarily between different households and generations. Policy makers could take steps to insulate households against some of these risks, for example through measures to dampen house price volatility and rebuild mechanisms for sharing more pension risks across cohorts.
• Better taxation – particularly in the case of the UK’s biggest wealth-related tax, Council Tax – would also help by shifting the tax burden towards the wealthier parts of Britain. Scotland and Wales have taken modest steps to make Council Tax fairer and more progressive, but England still has a long way to go.
