by UK inflation remained high at 9.9% in the 12 months to August, keeping it at its highest level for 40 years, as the cost of living crisis continues to bite.
Despite falling slightly from 10.1% in July in response to volatile fuel prices, the situation is likely to get worse before it gets better, with the Bank of England (BoE) forecasting inflation to pass 13% in the final quarter of current year.
The current rise means prices of everyday items such as basic food, fuel, clothes, shoes and furniture have risen over the past year, a development that threatens to hit low-income families harder at a time when they can’t afford it.
Charities have already reported increased sales and demand for second-hand clothing in response to rising production costs that are driving high street fashion to its most expensive levels since 1988, when records began.
“The easing in the annual rate of inflation in August 2022 mainly reflected a fall in the price of motor fuel in the transport part of the index,” the Office for National Statistics (ONS) said on 14 September.
“Smaller, partially offsetting, upward effects came from price increases in food and non-alcoholic beverages, miscellaneous goods and services, and clothing and footwear.”
Rising costs, staff shortages and supply chain disruption are known to affect both big retail brands and small businesses, leaving them with little choice, as they see it, but to pass on price increases to consumers to secure their own their survival.
Meanwhile, ONS figures revealed the extent to which UK wages have stagnated, with real pay falling by 3% in value between April and June, a rise in cash terms slowed by a rise in costs elsewhere.
Cost of living: How to get help
The cost of living crisis has touched every corner of the UK, pushing families to the brink with rising food and fuel prices.
- The independent asked experts to explain small ways you can stretch your money, including managing debt and getting things for free.
- If you need to access a food bank, find your council’s website using gov.uk, then use your local authority’s website to locate your nearest centre. The Trussell Trust, which runs several food banks, has a similar tool.
- Citizens Advice provides free help to people in need. The organization can help you find grants or benefits, or give you advice on rent, debt and budgeting.
- If you are feeling distressed and isolated or struggling to cope, the Samaritans offer support. you can speak to someone free of charge over the phone, confidentially, on 116 123 (UK and ROI), email [email protected] or visit the Samaritans website to find details of your nearest branch.
Private sector workers saw their pay rise 5.9 percent before inflation – more than three times faster than their public sector counterparts who received a 1.8 percent increase.
The figures set Liz Truss’s new government on course for further clashes with public servants including nurses, doctors, lawyers and teachers who have seen the value of their incomes collapse this year, adding to the pain of a decade of falling real wages.
“The scale of this wage pain is even deeper than the official figures suggest, as estimates of wage growth are still artificially boosted by the effects of last year’s furlough regime,” said Nye Cominetti, senior economist at Resolution Foundation.
“This squeeze came despite strong wage growth and a buoyant labor market, with wage settlements tightening slightly and almost a million people moving jobs over the past three months.”
Mrs Truss’s first move as prime minister to freeze Ofgem’s energy price cap, the maximum a utility can charge an average customer per year, at £2,500 over two years will have provided some relief to households, which were facing another 80 percent rise. on their bills from October 1 in response to the spike in global gas prices.
If the planned cap increase had been allowed to go ahead, it would have risen from £1,971 to £3,549 for an average household, with pre-paid meters charged even more.
The UK’s historical rate of inflation
(PA Graphics)
The new prime minister also pledged to honor former chancellor Rishi Sunak’s package of relief measures for British households announced in February as part of a bid to ease the “sting” of exploding bills.
But after a summer of inactivity, with the Tory leadership contest to choose Boris Johnson’s successor endlessly delayed and the incumbent opting to take several holidays rather than save the electorate, the nation remains in crisis.
British consumers are facing flat wages and higher costs for everything from food, clothes, petrol, heating, housing and rent at a time when rising interest rates mean borrowing costs are also rising, most recently up 0.5pc units to 2.25 percent. as the BoE’s Monetary Policy Committee moved to try to put a brake on inflation.
While the current outlook does indeed look bleak, consumers are encouraged to view the present adversity, which will eventually pass, as an opportunity to reassess their personal circumstances, streamline their finances and cut any necessary regular expenses.
“The most important thing savers can do now is review how this environment will affect their finances, where they hold their savings and make adjustments as needed,” said Colin Dyer, client director at Abrdn Financial Planning.
“For example, keeping significant amounts of cash in a savings account is essentially losing money in an inflationary environment, so depending on your attitude to risk, investing in stocks and shares ISAs can offer a greater return if invested for the long term.”
