Income inequality across the UK has fallen since the recession, with London benefitting the most from a ‘dramatic decline’ in the last 10 years, a report by the Institute for Fiscal Studies (IFS) has revealed.

The report, funded by the Joseph Rowntree Foundation, showed that rising employment rates and a fall in income among the middle and highest earners has helped to narrow the divide between the rich and the poor.

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While London remains the most unequal region in the UK, the incomes of low-income households in London – known as the 10^th percentile – have risen by more 10%, while the incomes of high-income households (the 90th percentile) have fallen by more than 10%.

However, according to the latest data available in 2015/16, average incomes were only 3.7% higher than before the recession which the report noted was “extremely slow growth by historical standards”.

The South East, which is the highest-income region in Britain, has a 25% higher average income than in the West Midlands – the lowest-paid region. However, the report pointed out that inequalities within regions are significantly wider than average incomes across the UK as a whole.

Agnes Norris Keiller, a research economist at the IFS and an author of the report said: “There are important gaps between the average incomes of different regions, though inequalities within regions are far larger than those between them. While London remains the most unequal part of the country, inequality in the capital has seen a dramatic decline over the last decade.”

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The Midlands has fared particularly badly in terms of income growth over the last 40 years. During the mid-1970s average incomes in the region were slightly above average but have fallen dramatically since, to as much as 10% below the average in the West Midlands.

Meanwhile incomes in the South of England (excluding London) and Scotland have done better than average, while average incomes in Wales and the north of England have slipped slightly further behind. The chart below demonstrates each region’s differences.

The level of poverty has failed to improve substantially over the last decade, the IFS said, which is a reflection of a lack of real income growth and particularly large falls in poverty over the preceding 10 years.

Poverty is especially geographically concentrated for working-age households, with just 13% of pensioners in poverty in the 10% most deprived areas of the UK.

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However, persistent poverty, defined as being in poverty in three out of the last four years is most likely to occur for pensioners, lone parents, and those with more than three children.

Robert Joyce, an associate director at IFS and another author of the report, added: “Although the post-recession years have seen modest income growth, with little change in poverty rates and inequality, many people have seen large changes in their incomes. Fluctuating incomes mean that many fewer people are classed as persistently poor than have a low income at any point in time.”