Current literature on the economic determinants of prejudice focuses on how relative deprivation might lead to bias by focusing on group perceptions, with little or no attention given to individual-level deprivation. We address this gap in literature by examining how relative and objective individual-level hardship affects generalised prejudice and suggest that both forms of deprivation lead to increase in a wide variety of out-group biases. We test our hypotheses with data from an original cross-national survey conducted in 2015 in nine European countries (N∼18,000) by applying multilevel models. We include macro-level measures of economic context, including measures of unemployment levels and GDP growth. We make a novel contribution to the growing literature on prejudice in European societies: our results are surprising and suggest that individuals experiencing deteriorating living standards are less likely to express generalised prejudice. We suggest that these findings can be explained using political psychology literature: recent studies suggest that low self-esteem increases altruistic behaviour and reduces the level of out-group bias. These findings open new avenues of research and suggest a new way of theorising the relationship between economic deprivation and prejudice.