The exact nature of the association between the context of the local area and local health outcomes is unknown. We investigated whether areas geographically close but divergent in terms of deprivation have greater inequality in health than those where deprivation is similar across neighbouring localities. In order to disaggregate the strong correlation between the deprivation of a target area and that of its surrounding areas, we used principal component analysis to create a measure of relative deprivation. Both deprivation (ß=0.183, p<0.001) and relative deprivation were positively associated with mortality (ß=0.099, p<0.001), and the effect of relative deprivation was shown to be most pronounced in more affluent segments of the population. Copyright © 2011 Elsevier Ltd. All rights reserved.