"Very deep poverty" refers to households with an after-housing-costs income below 40 per cent of the UK median, amounting to around stg16,400 ($A32,440) a year for a couple with two young children.
The report by Joseph Rowntree Foundation (JRF), which conducts research aimed at solving poverty in Britain, said the overall poverty rate in the UK fell slightly from 24 per cent in 1994/95 to 21 per cent in 2023/24, but "very deep poverty" edged up from eight per cent to 10 per cent, now accounting for almost half of everyone in poverty.
The report said child poverty has also climbed, with 4.5 million children in poverty, rising for the third year in a row.
It follows Finance Minister Rachel Reeves' November decision to scrap a two-child limit on welfare payments in April, a move that officials estimate will cost stg3.1 billion ($A6.1 billion) aimed at reducing child poverty rates by increasing benefits for families.
The cap, introduced by the Conservative government in 2017, has meant many low-income families do not receive further benefits when they have a third child or subsequent children.
The JRF welcomed the removal of the two-child limit but cautioned that it "cannot be the only step", warning that without further action in the government's strategy to end child poverty, progress is likely to stall.
According to the report, children remain disproportionately affected by poverty, along with people with disabilities, while certain minority groups, such as Bangladeshi and Pakistani communities in Britain, experience particularly high poverty rates.
Britain's economy grew by a stronger-than-expected 0.3 per cent in November, its strongest monthly rise since June. Inflation, however, rose more than forecast to 3.4 per cent in December but is expected to slow sharply soon.
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