Inequality to hit record high in Brexit Britain

UK Chancellor wants trade partnerships with the world
UK Chancellor wants trade partnerships with the world

Inequality is slated to get much worse in the U.K. as the government pushes ahead with its Brexit plans.

A new report by the British think tank Resolution Foundation predicts that rising inflation, planned welfare cuts and stagnating incomes will lead to record-high income inequality in the country by 2020.

"A particularly tight squeeze on poorer households will actually see their incomes fall and is set to drive the biggest rise in inequality over a parliament since Margaret Thatcher's time in Downing Street," the Resolution Foundation said in a statement.

The report forecasts that the poorest bracket of working families in the U.K. will be nearly 16% worse off over the coming four years. The wealthiest people will become 4% richer over the same period.

The dour outlook follows two consecutive years of strong income growth, with earnings boosted by low inflation, rising employment and falling oil prices.

"There are good reasons to think that this mini-boom has already drawn to an end," the researchers said. They forecast that the median income among working-age households will only grow by 0.3% annually over the next four years, after housing costs are paid.

The report was released on the same day that British lawmakers are expected to vote in favor of authorizing the government to begin the formal process of pulling the U.K. out of the European Union.

U.K. voters decided in June that they would rather leave the bloc, triggering a massive drop in the British pound.

Related: London's rivals roll out red carpet for bankers fleeing Brexit

The U.K. is expected to see a big surge in inflation this year because of the currency's sharp decline. The latest official inflation statistics show prices are rising by about 1.6% annually, up from zero in late 2015.

Torsten Bell, director of the Resolution Foundation, warned that Prime Minister Theresa May should focus on helping poorer families to ensure the coming years don't feel "like the 1980s without the feel-good factor."

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