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The Changing Anatomy of Economic Inequality in London (2007-2013)

Author: Polly Vizard, London School of Economics and Political Science, Eleni Karagiannaki, Jack Cunliffe, Amanda Fitzgerald, Polina Obolenskaya, Stephanie Thomson, Ruth Lupton

Falling incomes hit poorest Londoners hardest, says new LSE research

New analysis by academics at LSE shows that the capital’s economic success and relative resilience following the crash has not translated into lower inequality for Londoners.

The research, funded by independent charity Trust for London, looks at changes in economic inequality during and in the aftermath of the recession (2007-2013). It uses the latest data available, which can be analysed by a range of characteristics including gender, ethnicity and disability status.

Incomes fall for most Londoners

Between 2007/8 and 2012/13 median incomes for Londoners fell by 3 per cent before housing costs and by 11% when housing costs are taken into account).

The poorest Londoners were worse off than their counterparts in the rest of the UK. In 2012/13 the poorest 10% of Londoners had a weekly household income of £112 after housing costs versus £161 nationally. (Figures adjusted for household size).

Increasing income inequality

Taking into account housing costs in the capital, income inequality grew substantially. For the poorest 10% of Londoners, there was a fall of around a fifth in net income after housing costs – a bigger fall than for the most well off in London (10% fall for the richest 10% of Londoners) and than amongst the poorest in the rest of  the UK.

Incomes of the poorest 10% of Londoners living in privately rented accommodation in 2012/13 were as much as 53% lower in real terms after housing costs than their equivalents in 2007/8.

London’s very wealthiest get wealthier

In terms of physical, financial and property wealth, London residents in the bottom third of the distribution (30% of Londoners) were not as rich in 2010/12 as their counterparts in the rest of the UK. Those near the top of the wealth distribution were not only richer than their counterparts elsewhere, but also 26% wealthier than in 2006/8.

When pension wealth is included, one in ten London households owned total wealth worth more than £1 million in 2010/12.

Disabled people hard hit

Best estimates suggest that in London in 2007/08 the poorest 10% of individuals who experience a limiting-longstanding illness or disability had a weekly after housing costs income of less than £141. By 2012/13, best estimates suggest that this figure had fallen to £100. This is an apparent fall of around 29% (£41 a week) – double the equivalent figure for Londoners without disabilities and more pronounced than elsewhere in the UK[1].

Low pay and unemployment

The proportion of London workers who were paid less than the London Living Wage (LLW) increased substantially from 17% to 23% from 2007/8  to 2012/13. 18% of male workers and 27% of female workers earned below the LLW. The ethnic groups most strongly affected by low pay included Bangladeshi (47% paid below LLW), Pakistani (44% paid below LLW) and Black, African, Caribbean or Black British workers (31% paid below LLW).

Unemployment grew less rapidly in London than elsewhere between 2007/8 and 2012/13 (by 2%) but started from a higher level.


The capital moved further ahead of the rest of the England on educational qualifications. Four out of ten (42%) of Londoners had a degree in 2012/13 compared with 24% elsewhere.

Commenting Dr Polly Vizard, from the Centre for Social Exclusion at LSE, said:

“Our examination of detailed data on the position of different population groups up to 2012/13 suggests that economic outcomes for some of the poorest, lowest paid and most at risk Londoners deteriorated in the wake of the economic crisis and subsequent downturn, whilst wealth at the top of the distribution grew, and inequality against some indicators increased.

“As the 2015 General Election and 2016 Mayoral Elections approach, the findings show that disadvantage and inequality in the capital are major challenges for whoever gains power”.

Commenting Bharat Mehta OBE, Chief Executive of Trust for London, said:

““These figures tell two stories about London. First that it is a place of extremes – with great wealth and great poverty. The poorest in London are poorer than people elsewhere in the UK and the richest Londoners are better off than the richest elsewhere.

“The second is a story about what life is like for the majority. Median incomes for Londoners fell by 11% when housing costs are taken into account and surprisingly, the bottom 30% of Londoners are less wealthy than their equivalents in the UK.

“To start closing the gap and to tackle poverty, we need to address the issue of housing, which for many in London is their single biggest cost of living. Quite simply, we need more homes in London – to rent and to buy. These homes need to be affordable, with affordability linked to something sensible such as people’s incomes. We must challenge the view that has grown up in this country of property primarily being an asset rather than a home and a basic human need.”

[1] *A discontinuity in the identity of the disabled population means that income statistics for individuals who experience a limiting long-standing illnesses or disability (LLID) must be treated with caution.


12 March 2015

The Changing Anatomy of Economic Inequality in London (2007-2013)