Nowadays, numerous people in the United Kingdom struggle to meet their essential household costs, paying more for energy, food, and rent. The cost of living crisis means a fall in disposable incomes that the UK has experienced since late 2021.
Considering how miserable the situation has become and how challenging it can be to keep track of it, the articulation of this article intends to make you familiar with the cost of living crisis – What it is, why it’s happening, and what you can do about it.
What is the Cost of Living Crisis in the UK?
The cost of living crisis defines the current period where the cost of everyday essentials, such as energy, food, fuel, and real estate, has increased more rapidly than the average or real disposable income.
The Average disposable income has fallen by 16.5% in the past years, resulting in rising inflation. The term inflation is in the discussion of ongoing crises. Inflation solely measures how fast costs have increased year by year and ratified in a percentage.
The portrayal of the ‘cost of living’ as a ‘crisis’ refers to a situation where living standards get pressed such that people cannot afford the standard of living, and domestic income and savings are no longer growing at the same rate as the price of essential goods and services and are losing value in real terms.
Why the cost-of-living crisis has soared?
Intensifying petrol, food, and energy prices have shaken the world, the UK with a record-breaking cost-of-living crisis. According to an ONS report, in March 2022, 23% of families found it difficult to pay their monthly bills in the UK.
What caused the cost of living crisis in the UK
The core cause of the cost of living crisis is a blend of rising inflation and low wage growth, and several other factors have contributed to worsening UK economic conditions discussed below:
- Covid-19
During the COVID-19 pandemic, people cut back on expenses, and after the release of restrictions in 2021, people became free to spend collected savings, leading to a significant rise in aggregate demand.
But, firms are not prepared to deal with the surge in demand because they have laid off staff and cut back on investment.
- Russia and Ukraine War
The Russian-Ukraine war instigated a further supply shock, causing an outpouring in oil, gas, energy, and food prices. The price of oil usually surges as countries seek to buy more simultaneously, on supply restrictions imposed due to Russian sanctions.
- Mounting Energy Costs
Its aggravation by record-breaking energy price hikes and unusual fuel costs as a blend of factors endures the vilest crisis living ever.
- Profit-push inflation
According to the time-honored saying that a period of high inflation is always a good time for firms with market power to increase their profit margins, UK’s Competition and Markets Authority in 2022 observed profitability in companies of the UK has markup by 75 percent over the last two decades.
- Brexit-UK worse off
The Cost of Living crisis is due to the effect of Brexit. In particular, the demotion in the value of the Pound faced the consequence of rising import prices. Furthermore, Brexit has elevated the cost of doing business with Europe and added to the low productivity growth.
| Is the cost of living crisis global?Inflation is a global occurrence in the US and Europe. Nevertheless, assuming the low growth rate, UK inflation is relatively high. |
A tale of two crises: housing and the cost of living
The Cost of Living crisis puts pressure on the people with the lowest incomes, contending with two crisis-housing and the cost of living.
Many households are leading debt-driven lifestyles to cover essential needs such as rent, energy, or food, forcing them to ignore other expenses of Transport, Childcare, Clothing, etc.
Housing cost is usually the highest expense, and any increase affects renters hard. Likewise, renters are the most exposed to the cost of living crisis.
The cost of living crisis and its impact on education
The cost of living crisis has disturbingly impacted education in the UK, with schools facing significant repercussions for parents, guardians, teachers, school administration, and students.
Countless students are disturbed by what their families suffer at home, which impacts how they behave towards their peers and teachers and predominantly affects their learning.
The research conducted by the Sutton Trust study, “In state schools, 74% of teachers have seen an increase in pupils unable to concentrate or tired in class, 67% have more students with behavior issues, and 54% have seen an increase in those coming into school without adequate winter clothing like a coat. 38% of teachers reported an increase in children coming into school hungry.”
Mental health and the cost-of-living crisis report
The nerve-wracking cost of living crisis affects the mental health of UK people, tirelessly depriving income growth and developing harmful effects that hinder the ability to perform regular tasks.
The report of an Extensive survey finds that people in the UK are feeling anxious, stressed, and hopeless with the current economic situation.
Here are some of the instances of the percentages are mentioned below:
- 30% of adults in the UK report worse sleep quality
- 23% of people become less social
- 15% people reduced their hobby
- 12% of people decreased their exercise
Cost of living crisis: Pledged to succeed
After the uncontrolled initial months of Rishi Sunak’s tenure, he sought a fresh start in 2023, intending to bring peace of mind with five pledges to the British public and rightful direction for their country.
In the Latest Update on the UK cost of living crisis, Prime Minister- Sunak pledged “to halve inflation this year; to grow the economy and create better-paid jobs across the country; to see national debt fall; to shorten NHS waiting lists; and to pass new laws to stop small migrant boats crossing the Channel.”
| Impact of cost of living crisis in the UKThe cost of living crisis has wreaked turmoil on the UK economy, facing the highest inflation rate in over 40 years and the most significant drop in living standards in over 60 years. |
To Conclude
The UK government is struggling with the cost of living crisis even in 2023, along with other new Crises that have soared out of control almost simultaneously. Projections for the British economy are miserable at best.Many people are falling into debt to pay for essentials, which makes the problem worse. Sadly, the situation isn’t going to get at ease, though the UK government is extending some momentary support to combat this Cost of Living crisis.
