United Kingdom cost-of-living crisis

In late 2021, the prices of many essential goods in the United Kingdom began increasing faster than household incomes, resulting in a fall in real incomes. The phenomenon has been termed a cost-of-living crisis. It is due in part to the economic impact of the COVID-19 pandemic, including a global surge in inflation, wage stagnation attributed to the Conservative Party's austerity programme, as well as the economic instability and mass migration caused by Brexit and the Russo-Ukrainian war.

While all in the UK are affected by rising prices, the crisis most substantially affects people living in poverty. The British government has responded with measures including grants, tax rebates, and subsidies to electricity and gas suppliers. Regular pay began to outpace inflation beginning in May 2023, but living costs have remained at elevated levels, and have continued to increase faster than headline inflation into 2025. The Joseph Rowntree Foundation projected in 2025 that disposable incomes would continue to decline for the rest of the decade.

Definition

The Big Issue newspaper defines a cost-of-living crisis as "a scenario in which the cost of everyday essentials like energy and food is rising much faster than average incomes". The Institute for Government think tank defines the UK's cost-of-living crisis as "the fall in real disposable incomes (that is, adjusted for inflation and after taxes and benefits) that the UK has experienced since late 2021".

By January 2024, the 12-month Retail Price Index had fallen to 4% after peaking at 11.1% in October 2022, while workers' wages had risen 6.2% in the last quarter of 2023.