Dementia costs the country £23 billion per year and more than cancer and heart disease combined but receives a fraction of the funding, according to a "wake-up call" report out today.
The number of sufferers at 822,000 is also 17 per cent higher than has previously been estimated and will pass the one million mark before 2025, the Alzheimer's Research Trust (ART) said.
Revealing stark differences in research funding, it calculated that for every pound spent on dementia studies, £12 is spent on investigating cancer and £3 on heart disease.
Rebecca Wood, chief executive of the ART, called for greater resources to fight the condition, saying: "The true impact of dementia has been ignored for too long.
"The UK's dementia crisis is worse than we feared. This report shows that dementia is the greatest medical challenge of the 21st century."
She added: "If we spend a more proportionate sum on dementia research, we could unleash the full potential of our scientists in their race for a cure.
"Spending millions now really can save us crippling multi-billion pound care bills later."
According to the report, which was prepared with experts from Oxford University, dementia's overall annual cost dwarfs the £12 billion cost for cancer care and the £8 billion for heart disease.
The £23 billion is made up of £9 billion in social care costs, £12 billion in unpaid care and £1.2 billion in health care costs.
Each dementia patient costs the economy £27,647 each year, researchers found, nearly five times more than a cancer patient and eight times more than someone suffering from heart disease.
The expense is driven mainly by the extent of unpaid carers and long-term institutional care - in contrast to cancer and heart disease whose costs are mainly taken care of by the NHS.
Big differences in research funding were also revealed in the study, called the Dementia 2010 report.
At £590 million, cancer research funding is 12 times the £50 million devoted to dementia, while heart disease received more than three times as much. Only stroke research received less.
The report calculated that £295 is spent on research for every person with cancer, compared with just £61 for each person with dementia.
Alastair Gray, professor of health economics at Oxford University and report author, contrasted the perception of the disease with cancer.
He said: "Many of us know people who have had cancer or heart disease but have been successfully treated and survived, so there is a perception that something can be done, and that more research will allow even more to be done.
"In contrast there are no cures for dementia at present; there are not even many ways of delaying it or slowing it down, so there may well be a feeling of inevitability surrounding it.
"However the lack of of effective treatments is surely an argument for devoting more effort to research, not less."
The report also documents a "diagnosis gap", between the expected number of people with dementia and the number of patients with dementia on GP registers.
In England, it is estimated only 31% of people with dementia are registered on GP lists.
Reasons for the low rate include GPs' lack of training and low confidence in diagnosing dementia.
Health minister Phil Hope said on BBC Radio 4's Today programme: "I would fully agree that dementia is one of the most important issues we face as a population, particularly as more and more people are living longer.
"I want to see a step-change increase in the volume, the quality and the impact of dementia research going forward.
"We have identified the importance of research in the dementia strategy I published last year. We convened a dementia summit bringing together the top researchers from across the country and abroad.
"We have identified the key areas we need to take forward around the causes for dementia and the possible cures for it and how we can better care for people, to help them live well with dementia."