The rising cost of living in the UK has become a severe crisis. According to UK Parliament, the cost of living has been increasing across the UK since early 2021. The annual inflation rate was the highest since 1982 in June 2022. Consumer goods and energy prices are pushing inflation higher. Consumer prices were 9.4% higher in June 2022 than a year before. As Big Issue says, millions of households across the UK continue to grapple with sky-high bills and everyday essentials. And the cost of living crisis shows no sign of slowing. CNBC says Britain’s cost-of-living situation worsens as rents soar and energy bills top $5,000.
The UK Parliament refers to energy prices as an essential driver of inflation. Household energy tariffs are increasing, and petrol costs are going up. From June 2021 to June 2022, domestic gas prices increased by 95% and domestic electricity prices by 54%. On 1 April 2022, the new price cap came into force. The regulator Ofgem announced the cap would increase from its current equivalent annual level of £1,277 per year to £1,971, a 54% increase. The latest Cornwall Insight forecast is that the energy price cap will increase by 65% to around £3,245 in October.
Big Issue says that Ofgem recently introduced a quarterly price cap. Forecasts suggest that bills could rise to almost £4,000 per year in January 2023. According to CNBC, the typical household is expected to spend the equivalent of £4,266 on energy each year from January.
According to CNBC, a skyrocketing energy price cap and high rental prices are just two factors contributing to the rising cost of living in the UK. Legal and General CEO Nigel Wilson calls the rising cost of living in the UK “a tragedy for many people.” According to Zoopla, a UK property site, rent prices are up 11% compared to last year.
As Big Issue says, the average cost of renting a home has risen to record levels. Rents have jumped by over 20 per cent in some areas like Manchester, data from property website Rightmove suggests. Average rents outside London are around 11.8 per cent higher than a year ago. Rents within the capital are up by about 15.8 per cent. Data shows that private rents are unaffordable for the poorest in the country.
Inflation rate in the world vs the UK
As the UK Parliament says, in June 2022, the OECD reported that the UK’s annual inflation rate was 9.4%. This inflation rate was higher than in comparable economies such as France (6.5%), Germany (8.2%) and the Eurozone average (8.6%). OECD stands for Organisation for Economic Co-operation and Development.
Big Issue says that the impact of rising prices is a global issue. However, differing policies mean that some households receive better protection than others. In France, for instance, the government prevented the energy price cap from rising by more than 4 per cent. The French government forced national energy supplier EDF to absorb extra costs instead. In the UK, ordinary households absorbed a rise of 54 per cent in their energy bills. However, suppliers like British Gas have recorded record profits.
Effect of demand from consumers
The UK Parliament says strong demand from consumers and supply chain bottlenecks have contributed to increases in the costs of consumer goods. According to Big Issue, high demand for oil and gas outstripped the available supply. The Ukraine conflict has exacerbated this further, with an ample supply usually coming from Russia. As Love Well says, oil and gas demand is increasing energy prices worldwide. High demand means higher bills for householders and businesses.
Effect of the Russia-Ukraine war
Another factor that affects the rising cost of living in the UK is the Russia-Ukraine war. According to the UK Parliament, Russia and Ukraine are large exporters of agricultural products, such as wheat and some metals. These products have become more expensive on international markets, leading to increased food and materials prices in the UK.
According to the Bank of England, higher energy prices are one of the main reasons the inflation rate is so high. Russia’s invasion of Ukraine has led to significant increases in the price of gas. Since May, the cost of gas has doubled. Those price rises may push inflation even higher over the next few months, to around 13%.
Effect of Covid pandemic
Some experts consider the pandemic another factor affecting the rising cost of living in the UK. According to the Bank of England, higher prices for the goods the UK buys abroad have played a significant role. During the Covid pandemic, people started to buy more goods. But the people selling these have had problems getting enough of them to sell to customers. That led to higher prices – particularly for goods imported from abroad. As Love Well says, government support to businesses during the pandemic, like the Furlough scheme, has ended. As Forbes says, we cannot underestimate the effects of the pandemic on the rising cost of living in the UK. The pandemic brought social and economic upheaval, from the multi-billion pound cost of furlough to devastation for the transport, travel, hospitality, entertainment and leisure industries.
Charities and experts have warned of an extremely tough winter ahead. Energy bills will likely rise again in October as the weather gets colder. Economists are now warning that the UK is set to enter a recession. The current situation has left many struggling to cope with rising prices. Food banks have reported that they’re running low on donations. Reports suggest that some households skip meals to save money (Big Issue).
To sum up, more than three-quarters of adults in Great Britain worry about the rising cost of living. This statistic is based on research by the Office for National Statistics (the Guardian, Fri 10 June 2022). The UK households have faced unprecedented blows to their living standards in 2022. Home energy costs have more than doubled and are threatening to triple. The price of petrol has risen by more than half since last year. And overall, price inflation is heading for double digits (The Conversation). Prime Minister Boris Johnson’s spokesperson said it would be up to his successor to make decisions on the matter (CNBC). Thus the British economic system has turned into a catastrophe. The government needs to change its policies to save people from this devastating crisis.