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How has Covid-19 affected wealth disparities among ethnic groups in the UK?

The pandemic has affected the finances of some ethnic groups in the UK more adversely than others. Inequalities in various types of wealth – from home ownership to pensions – have played a key part in driving the economic hardship felt by many minority households.

The Covid-19 crisis has highlighted the role that wealth can play in providing households with a financial cushion in the event of a sudden fall in income. 

In economics, this is referred to as ‘consumption smoothing’, whereby households use savings accumulated in earlier periods to finance their day-to-day activities and maintain their living standards during downturns. 

While research shows only a weak link between earnings and wealth, there is no doubt that households with higher earners and a greater number of individuals in work can better withstand an unexpected economic shock (Pfeffer and Waitkus, 2021). 

In the case of Covid-19, blue-collar workers were disproportionately affected, due to the types of occupations and sectors in which they work (OECD, 2021).

Further, evidence shows that ethnic minority groups in the UK were more likely to report using savings and/or borrowing to mitigate earnings losses experienced early in the pandemic (Crossley et al, 2021a). 

Indeed, Covid-19 brought into sharp focus the vast differences in wealth among individuals and households. These have received growing attention in recent years, following the influential work of Angus DeatonThomas Piketty and Emmanuel Saez, among others. 

Inequalities in wealth within countries are stratified by certain characteristics, such as race. The UK provides a useful case study in this respect, given the range of different ethnic minority groups in the country, many of which emigrated from Commonwealth countries throughout the second half of the 20th century. 

Based on observable characteristics, such as health, education, income (including earnings) and wealth and outcomes such as poverty, ethnic minority groups have assimilated and thrived to varying degrees. But typically, people in these groups are relatively poorer and less wealthy than their white counterparts (Modood et al, 1997; Nandi and Platt, 2010; Fisher and Nandi, 2015; Perez-Hernandez et al, 2018).

The pandemic has exacerbated existing wealth inequalities both across and within different ethnic minority groups in the UK. To understand the impact of the crisis on the racial wealth gap, we first need to understand differences across groups before the arrival of the virus.

Differences in wealth inequalities by major ethnic group in Great Britain 

There are five major ethnic minority groups in Great Britain. Figure 1 shows average differences in total net household wealth just prior to the pandemic. The data, taken from the Wealth and Assets Survey conducted by the Office for National Statistics (ONS), are split by ethnicity, compared with the white British group. The ethnicity assigned to each household is that of the head of the household. Total net household wealth is defined as the sum of net wealth held in property, private pensions, financial and physical items. 

Figure 1: Total net household wealth by ethnic group relative to the white British group

Source: ONS, 2022 
Note: Estimated difference in total net household wealth after controlling for age, sex, education level, socio-economic classification of the head of household, housing tenure and household composition; April 2018-March 2020 prices.

After controlling for important demographic and socio-economic factors, the data show that Pakistani, black African, Bangladeshi, Indian and other Asian households all report significantly lower levels of total net wealth compared with white British households. 

Two notable findings emerge from Figure 1. First the magnitude of the differences between groups is large. For example, the average white British household has a total net wealth of £243,700 more than the average Pakistani household. 

To benchmark the wealth gap, we note the average level of total net wealth among all households (which includes all ethnic minority groups) based on the same data is £576,235. 

Second, the data highlight significant variation in total net household wealth within the same ethnic group. As a result, while there is a wealth gap between certain ethnic minority groups and white British households, there are no statistically significant differences in average wealth holdings between Pakistani, black African, Bangladeshi, Indian and other Asian households. 

It is also important to note that wealth is heavily skewed and under-reported (see Advani et al, 2021). This means that the differences shown when using group averages (as in Figure 1) are affected by households with extreme wealth holdings. 

For example, if instead one compares the difference in total net median household wealth holdings between Pakistani and white British households, the gap is £164,200 (in favour of white British households). The difference between Indians and white British is -£19,500 – that is to say, median total net wealth is higher among Indians (ONS, 2022).

What contributes to net wealth within different ethnic groups?

To understand how the pandemic has affected different ethnic groups to varying degrees, it is important to consider how the composition of household wealth portfolios varies across groups. 

Total net wealth can be broken down into four components: property, financial, physical and private pension wealth. Figure 2 splits out total median household net wealth by the contribution made by each of these wealth types. 

Figure 2: Total and sub-components of median wealth household wealth by ethnicity

Source: ONS, 2022 
Note: Estimates of total household net wealth and sub-components (property, pension, physical and financial) by ethnic minority group; March 2018-April 2020 prices.

Figure 2 shows considerable differences in the level of certain types of wealth and the overall composition of household wealth portfolios held by ethnic minority households. While for most households, property and pensions typically account for the majority of total net household wealth, Indians hold a relatively larger share of their total wealth in the form of property, even compared with the white British group (44% compared with 25%). Comparably, black Africans only hold 13% of their total net household wealth in this form. 

This reflects the fact that around 80% of Indians are likely to hold housing wealth compared with only 39% and 29% of black Caribbeans and black Africans, respectively (ONS, 2020). The average level of net property wealth is also higher for this group. 

For example, the median level of net property wealth held by Indian households is £165,000 versus zero held by black Caribbeans and black Africans – precisely because a higher fraction of the latter two groups report not holding property wealth at all (ONS, 2022).

In the case of pension wealth, the median level of household private pension wealth held by Indians (at £57,100) is far lower than white British households (at £84,800). This is still higher than any other ethnic minority group (ONS, 2022).

This is likely to be explained in part by the labour market characteristics of household members in white British households compared with ethnic minority groups. These include whether they are employed or self-employed, the sectors in which they work, differences in earnings and the number of individuals employed (Vlachantoni et al, 2015). 

The trend in financial wealth held by ethnic minority groups follows a similar pattern to that for housing and pension wealth. But for the majority of households, except the most wealthy, financial wealth constitutes a relatively small fraction of total household net wealth. There is also no clear pattern by ethnic minority group in the case of physical wealth, which includes household goods and vehicles. 

What has been the impact of Covid-19 for ethnic minorities and wealth inequalities?

Covid-19 has exacerbated existing wealth inequalities (Leslie and Shah, 2021Xu et al, 2022). The nature of the pandemic and its implications for hybrid working caused a surge in demand for housing, which has driven up prices, particularly in areas outside major cities like London. This has been further exacerbated by existing shortages of suitable housing stock. 

The pandemic also bought into focus the importance of owning particular asset types, such as housing, prior to the pandemic. Those groups that owned homes saw sharp and significant increases in their housing wealth. Pension and financial wealth were also directly affected due to their close links with financial markets. Following a sharp deterioration, markets rebounded quickly, and in early 2022, they are close to reaching pre-pandemic levels in the UK. 

Separately, the pandemic has accelerated structural changes in the labour market resulting from rapid technological change, including teleworking, automation and artificial intelligence. These changes imply that earnings and income inequality are likely to have diverged further, given already increasing wage polarisation (Georgieff, 2021).

Jobs in certain sectors of the labour market or those that are low paid – which require repetitive non-cognitive tasks – are more likely to be automated. Evidence suggests that this happened in the textile industry during the 1990s in the UK, disproportionately affecting Indian, Pakistani and Bangladeshi groups (Clark and Shankley, 2020).

What does this imply for ethnic minority wealth inequalities? Data covering the pandemic period are not currently available, but we can infer several likely outcomes given what we know about ethnic minority groups prior to the pandemic and evidence from other studies. 

First, there are effects in terms of differences in homeownership and where ethnic minorities reside. House prices increased by 10.8% between December 2020 and December 2021 alone, and the average house in the UK is now worth £275,000 (ONS, 2022a). 

As a result, in the absence of significant changes in housing tenure over the pandemic period, certain groups, such as Indians and the white majority, are likely to have benefited disproportionately from this price increase. This still applies even if the former group was more likely to reside in London, which saw a relatively smaller increase in property values. 

On the other hand, groups that are more likely to rent in the private sector, such as black Africans and Pakistanis, have experienced rent increases, particularly in the latter part of the pandemic. Average rents are predicted to have risen by 2% between January 2021 and January 2022, with further increases expected (ONS, 2022b). 

The fact that average house prices were 6.7 times average earnings in early 2022 (up from 5.8 in 2019) implies that homeownership opportunities are deteriorating (The Guardian, 2022).

Research also shows that ethnic minority groups were more likely to become unemployed rather than put on furlough. This meant that people in these groups were more likely to draw down savings (reducing their wealth) or borrow (increasing their debt) during the early phase of the pandemic compared with their white counterparts (Crossley et al, 2021a2021b).

While the employment gap between ethnic minorities and the white majority had returned to pre-pandemic levels by March 2021 (Crossley et al, 2021b), the initial job displacement meant that a higher proportion of ethnic minorities experienced a period of unemployment before making the transition to a new job.

Evidence also shows that savings rates were much lower, and conversely debt increased, among individuals with the lowest incomes before the pandemic (Crossley et al, 2021b). This is typically more likely to include individuals belonging to an ethnic minority group (Platt, 2011Perez-Hernandez et al, 2018). 

Financial markets have broadly recovered since the drop at the start of the pandemic and despite the recent disruption due to the war in Ukraine. But the changes to pension wealth over the course of the pandemic will depend on an individual’s employment history, age and the underlying portfolio structure of their pension pot.

The extreme swings in market volatility and the fact that a large proportion of certain ethnic minority groups – such as Pakistanis, Bangladeshis and black Africans (particularly older individuals) – do not have any pension wealth suggest that the distribution of this is likely to remain highly unequal. 

On the other hand, financial wealth is heavily concentrated among the wealthiest in society and, as discussed above, it is more likely to be held by the white majority and certain ethnic minorities. 

ONS analysis of the Wealth and Assets Survey covering the period 2018-20 highlights that 8% of black African households hold negative net financial wealth – in other words, they are in debt. The median financial wealth level held by these households is £200, compared with around £11,700 for Indian households. 

Evidence suggests that even prior to the pandemic, inequality in financial wealth was increasing (ONS, 2019). Going forward, inequality in this type of wealth is likely to have increased further. 


Wealth plays a central role in determining an individual’s living standards. Along with income, it can help households to cushion unanticipated economic shocks. 

There were significant wealth inequalities prior to Covid-19 across and within ethnic minority groups. Given the composition of ethnic minority household wealth portfolios before the pandemic, it is likely that differences in household wealth have widened. This is largely because of how the crisis has affected labour and financial markets. 

This should be a concern for policy-makers. The government needs to help to support and improve living standards and ensure that all households – particularly the least well off, who are disproportionately more likely to be ethnic minority households – are able to withstand any future shocks. The pandemic has deepened an existing crisis, leaving vulnerable groups increasingly at risk to the next big challenge.

Where can I find out more?

Who are experts on this question?

  • Arun Advani
  • Ricky Kanabar
  • Lucinda Platt
  • Thomas Crossley
Author: Ricky Kanabar
Author's note: The prices in the article using round seven of WAS reflect those reported at the time of the survey interview (between April 2018 and March 2020).
Acknowledgment: The author would like to thank the ONS Wealth and Assets Survey team for providing data relating to round seven of the survey, which was used in this article, the Economics Observatory editorial team and Alita Nandi for reading a preliminary version of this article. 
Photo by Dmytro Varavin from iStock
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