Is income inequality really growing?

The income divide

IGD’s recent Viewpoint report, How to respond to rising costs in 2025, reveals a significant income divide with low-income groups planning to cut food costs the most. IGD’s new ShopperVista report, Shopper Outlook 2025, also highlights key differences by income group

• High Confidence: Households with incomes over £62,000 per year, particularly young households and those with children, exhibit the highest levels of confidence.

• Low Confidence: Older households, especially those with incomes under £28,000 per year and those without children, show the lowest levels of confidence.

Shopper confidence index, by income and life stage

Higher = more confident

Average for 12m ending March 2025 = 0

	Income <£28k	Mid income	Income >£62k
<45, no kids	-2	-1	5
With kids	0	3	26
>45, no kids	-8	-5	-3

Source: ShopperVista, IGD Research, June 2025

Fieldwork: 12m ending March 2025, >1,000 GB shoppers per month, balanced sample

This data highlights that shopper confidence in the food and drink market is closely linked to income and life stage. Therefore, businesses in this sector should pay attention to how incomes evolve over time to better understand and cater to their customers' needs.

However, is the income divide becoming more pronounced?

Income stagnation – a decade of flat growth

Government data shows that, when inflation is taken into account, median income in the UK has been broadly flat since around 2009.

All income groups have been affected, with income “flat-lining”, not growing. Income distribution and equality have also been “frozen” for a long period.

However, wealth distribution (i.e. ownership of valuable assets) has shifted in favour of the better-off, especially older households that own property and have savings.

This long period of flat “real” incomes has deep implications for consumers. Most importantly, it makes households vulnerable to any change in the cost of essential items, such as food and energy.

Prices for both have risen significantly ahead of background inflation in recent years and incomes have not risen fast enough to compensate.

Financial differences between households may not have grown, but the impact of those differences on consumer experiences probably has.

We see the impact of this in terms of low shopper confidence and “defensive” shopping choices, especially in lower-income groups.

There are business implications as well – it is extremely difficult for businesses in any consumer-facing market to grow when incomes are flat.

Again, we can see the impact of this in market data for food and drink businesses. Food retail, in particular, has seen sales stagnate in real terms since around 2009, coinciding with the flattening of incomes.

Looking ahead

Forecasts from the Office for Budget Responsibility (OBR) suggest that real household incomes will grow modestly over the next few years, but risk to this forecast is high – inflation or economic shocks may derail this.

IGD is less optimistic than the OBR, noting that the government has not been able to deliver major income growth for an extended period, despite the efforts of policy makers. It is hard to see why this will change any time soon.

Higher incomes would support better performance for food and drink businesses but, right now, this does not seem like a safe bet.

In the short- to mid-term, businesses may be better off focusing on productivity, rather than growth. This would create additional value from existing transactions, with benefits for both consumers and businesses.

That said, it is clear from government data that shopper income varies widely and some households are still doing OK.

 IGD’s ShopperVista research shows that better off households are more upbeat and more willing to spend money on food and drink experiences – and it shows how to find growth in those gaps.