The ‘cost of living crisis’ refers to the fall in ‘real’ disposable incomes (that is, adjusted for inflation and after taxes and benefits) that the UK has experienced since late 2021. The government has responded to the crisis with several packages of support throughout this and last year. In 2022/23 household income support totalled £59.8bn. The latest updates on support were announced in the spring budget, including an extension of the Energy Price Guarantee (EPG) which caps the unit rate of gas or electricity at a more generous rate so that the average household will still face an annual bill of £2,500 until July. Even Though they conducted this extensive report, household incomes are not able to keep up with living costs and are not expected to return to 2021 levels in real terms until 2027. If you would like to see how rising prices are affecting what you spend your money on, use this Personal Inflation Calculator.
How is it affecting us in the UK?
Retail sales volumes (the amount of stuff bought) are estimated to have fallen by 0.9% in March 2023.
The retail sales volume fall follows a rise of 1.1% in February 2023 and 1.2% in January, meaning that the broader picture shows sales volumes rising by 0.6% in the three months to March 2023 when compared with the three previous months. This has been the first three-month on three-month rise since August 2021. Non-food store sales volumes fell by 1.3% in March 2023, following a rise of 2.4% in February. Food store sales volumes fell by 0.7% in March 2023, following a rise of 0.6% in February 2023.
The prices of food and non-alcoholic drinks rose at the fastest rate in more than 45 years in the 12 months to March 2023. The annual inflation rate in this category was 19.2%, up from 18.2% in the year to February 2023. Indicative modelled estimates suggest that the rate would have last been higher in August 1977, when it was estimated to be 21.9%. The largest contributor to the rise in food inflation was bread and cereals, for which average prices rose by 19.4% in the year to March 2023.
Due to the cost-of-living crisis, poverty and financial stress will also likely rise over the next few years. We are seeing increased reports across the UK that more people are going without basic living essentials, such as food and a warm home. Our UK-wide survey has also shown that many people across the UK are feeling anxious, stressed and hopeless due to their current financial situation.
We expect that the effects of the cost-of-living crisis on public mental health will be on a scale similar to the COVID-19 pandemic. Our survey also found that concerns about finances are having a negative effect on people’s ability to engage in some of the activities known to help protect mental health and prevent problems from developing:
30% of adults in the UK have poorer quality sleep
23% meet with friends less often
15% pursued a hobby less often
12% exercised less often
We call on governments across the UK to take action to support people with the same urgency as we dealt with COVID-19. The most crucial action to support good public mental health will be financial support schemes that prevent people from experiencing poverty and financial stress.
What can you do to try and tackle this?
1 in 5 people are currently struggling to meet the rising cost of living such as energy bills, petrol & food. Some useful tips include :
Track your spending and set a budget. Manage your money and set a budget. This will help you to understand your spending habits, monthly income and overall financial position.
Turn down your thermostat. Almost half the money spent on energy bills is absorbed by heating and hot water costs. Turning your heating down by just one degree could save up to £80 a year.
Chop your food spend. Your food shopping is one of the biggest costs you have to budget for. By looking for ways to save money, you may find increased food costs easier to deal with. Save money by preparing and cooking your own meals as this is generally cheaper than buying takeaways or ready meals, and healthier too!
Switch off standby. You can save around £40 a year just by remembering to turn your appliances off standby mode.
Cut your fuel costs. Try to look out for the cheapest petrol stations. There are certain apps such as petrol prices which can help.
Don’t let savings go down the drain. Taking 4-minute showers could save a typical household £45 a year on their energy bills. Some of us might enjoy a long soak in the bath, but swapping just one bath a week could make a difference. You can also save around £20 a year on your energy bill by using your washing machine more carefully - try a 30-degree cycle instead of higher temperatures and only wash your clothes when you have a full load.
Do things that enrich your mental health. The increases in prices can cause stress and depression to those who are struggling. Please reach out to those around you and don't take this on by yourself.