Poverty is up in London, but not in the rest of the country. Why is London an outlier?

Overall, 27% of Londoners are living in poverty: almost 2.5 million people, nearly twice the population of Birmingham.

This was surprising. The government had made changes to how poverty is measured, which meant – in broad terms – we expected poverty rates to go down.

That’s what happened across most other regions in England. But in London it went up. And the gap between London and the next highest region – West Midlands – is even higher than before.

In this analysis, we explore the newly released data and ask: why is London’s poverty rate an outlier?

First, a note on the numbers

This year, the DWP made changes to how poverty is calculated.

We wrote about this more here, but essentially, it incorporated data from the social security system. This means that we have a better understanding of what benefits people are actually receiving.

Because people tend to underreport the amount of benefits they receive, adding this data was expected to ‘reduce’ the poverty rate across the board by around one to two percentage points. Not because poverty is necessarily reducing, but because we have a better understanding of people’s incomes.

The Department for Work and Pensions (DWP) is still improving its methods, and more changes are coming, particularly to how it counts populations.

This means that the numbers in this piece are estimates. They should be read as indicative rather than precise, and we’ll continue to provide updates as new data is released in the coming months and years.

But we think the broad direction of travel is worth taking seriously.

So what exactly has happened to London’s poverty rate?

The government has provided us with estimated poverty rates using the new methodology for this year.

On top of this, it’s provided us with three years of data using both methodologies. This means we can compare poverty rates under both for 2022 to 2024. You can see this in the chart below.

Where we can compare the two methods, the new one produces a poverty rate one to two percentage points lower, exactly as expected.

This suggests that London’s rising poverty rate is telling us something that is really happening in London, rather than a quirk in the data – though we still can’t rule this out.

A three percentage point increase might seem modest. But that's around a quarter of a million more Londoners living in poverty.

By contrast, in the rest of England, the poverty rate has stayed exactly the same (19%) over the past two years, using the new methodology.

What's going on?

To understand what’s going on, we’ve looked at which groups make up that increase.

The picture is complicated, but it does appear to show that something is happening in London that isn’t happening in the rest of England. A few things stand out:

• The rise in poverty is mostly seen among young Londoners, as well as Black and minoritised Londoners.
• The cost of housing means that single households are especially likely to be in poverty – and high childcare costs mean this is especially true for households with children
• As well as the number of people in poverty increasing, the depth of that poverty – or how far below the poverty line people are – is also increasing.

We explore each of these findings in more depth below.

The rise is highest in young Londoners

Of the estimated 250,000 more Londoners living in poverty, a staggering 80% are under the age of 35.

The biggest increase is among the 16-24 group, whose estimated poverty rate has risen from 33% to 40%. In contrast, for Londoners over the age of 50, the estimated poverty rate has barely moved.

Two things make this striking. First, it is not happening elsewhere. In the rest of England, estimated poverty has fallen by around one percentage point in every age group, including 16 to 24 year olds.

Second, this is the same age group seeing a sharp rise in unemployment. In London, 18.2% of 16 to 24 year olds are unemployed. That is more than three times the rate across London's population as a whole, and 50% higher than the rate for the same age group in the rest of the country.

It is worth keeping this in perspective. Youth unemployment is rising, and so is the number of young people not in education, employment or training (often called NEETs). Both are deeply concerning.

But both are still below where they were 15 years ag. London’s poverty rate is roughly where it was back then too, albeit measured differently.

What could be happening now is that high youth unemployment is combining with London's cost of living and a weaker social security safety net, and the result is rising poverty.

Housing, and the cost of raising a child

In London, questions about poverty usually come back to one thing: housing.

The cost and availability of housing is still the single biggest driver of poverty in the capital. You can see this clearly in the two ways poverty is measured.

Before housing costs are taken into account, London has one of the lowest poverty rates in the country. Once rent and mortgage payments are counted, it has the highest.

This is why single-person households are so exposed. They cannot split an expensive private rent across two incomes. More than half of single parent households are in poverty in London.

But housing costs cannot explain this particular rise. London's poverty rate has gone up four percentage points over the last two years, and it went up by the same amount before housing costs as after.

If soaring rents were driving the increase, we would expect to see the rise only in the after-housing-costs figure.

So something else is going on. One likely factor is the cost of raising children, and childcare in particular, which is far more expensive in London than elsewhere.

Most of the additional people in poverty are either couples with children or single-parent households, as shown by the chart below.

Working poverty goes up

If we look at the working status of those in poverty, we get another interesting finding.

Of those 250,000 additional people in poverty, the vast majority (210,000) are in working households. This means a household where one or more member of the household is in work.

Two of our findings so far – estimated poverty going up mostly among young people, who are most likely to be unemployed, while mostly in working households seem to contradict each other.

But the measure looks at working households, not working individuals. This could suggest it’s predominantly young people who, for example, live at home, and one or both of their parents are in work.

Increasing poverty among Black and minoritised Londoners

Estimated poverty among white Londoners has essentially remained the same.

Among Black and minoritised Londoners, though, it’s gone up – from 35% to 40%.

This finding needs particular caution. To produce it, DWP relies on population estimates for specific groups, and those estimates are based on a discontinued data source that is not publicly available. This is one of the areas DWP is expected to change.

Poverty is deepening

Alongside the estimated number of people in poverty increasing, so has the depth of poverty in London.

We consider someone in ‘deep poverty’ when their income is 50% or below of the median income. In London, this has increased in every age group except pensioners.

Children are significantly more likely to be in deep poverty even than just a year ago.

The opposite is the case in the rest of England – every age group has seen deep poverty decrease.

So what does all this mean?

Poverty data is confusing. It can be difficult to paint a story of what it’s really telling us about what’s happening  especially when combined with methodological changes.

Because of this, we have to treat the findings in this analysis with caution.

On top of this the data always comes with a lag. This means important changes, such as the end of two-child limit, which will have a real impact on poverty rates, don’t yet show up in the data.

Nonetheless, the data points towards a stark picture. It suggests that poverty in London is going up, while in the rest of the country it isn’t.

It also suggests that poverty is mostly going up among Black and minoritised Londoners, mostly families with children, and mostly young people.

We will keep watching how these estimates change as DWP continues to improve the underlying data. We expect to be able to say more once DWP updates its figures to use population estimates based on the 2021 census.

For now, the data we have suggests that something is happening in London that is not happening anywhere else in England.