Why is the Cost of Living Increasing in the UK?
The cost of living has increased in the UK due to Brexit, inflation, supply chain issues and global squeeze on energy prices.
Since the start of the pandemic, prices have increased faster than at any time in the past 30 years and wages are failing to keep up.
Inflation Keeps on Soaring
You may not notice price rises from month to month. But right now, prices are rising so quickly that average pay is not keeping up.
In the 12 months to December, inflation rose to 5.4%. The Bank of England has warned inflation could rise above 7% this year.
The main reason is the rising global price of energy. This has meant higher energy and transport bills for businesses, many of whom pass on the extra costs to customers.
Supply problems and higher shipping costs also continue to hurt businesses.
UK Households Are Struggling Amid the Covid-19 Pandemic
A number of measures will hit UK households:
- Average gas and electricity bills are going to rise by £693 a year from April.
- Many consumers are squeezed out of the market, leading to a slowdown in home sales.
- Regulated rail fares in England will rise by 3.8% in March.
- TV and broadband prices are also due to increase at that time.
- Higher food, gasoline, and utility costs mean less money for savings or discretionary spending.
- In April, companies, workers and the self-employed will start paying 1.25p more in the pound in National Insurance contributions under the Health and Social Care Levy.
- Rising interest rates will make mortgage payments higher for some homeowners.
What Can Be Done To Reduce Cost of Living?
The very first step you should take when trying to reduce your cost of living, is to get on a strict personal budget. This will help you wrap your head around your spending habits, monthly income, and overall financial situation.
The Bank of England's traditional response to rising inflation is to raise interest rates. It has done this twice in the past few months. Since inflation is caused by external forces, such as the global squeeze on energy prices, then this might not be the answer.
The government might choose instead to cut taxes for consumers on items that are rising quickly. It is taking some measures to reduce the impact of energy price rises, for example.
Trending
-
1 Building a Strong Financial Foundation: Saving, Investing, and Retirement Planning
Daniel Hall -
2 Franchise Investment Pitfalls to Avoid: A Beginner's Checklist
Daniel Hall -
3 Why Selling to an iBuyer Could Be the Best Move for Your Home
Daniel Hall -
4 Financial Tips for Businesses: Reducing Expenses Without Sacrificing Quality
Daniel Hall -
5 9 Tips to Help You Secure a Graduate Job in Finance
Daniel Hall
Comments