Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Cost of living crisis in the UK - statistics & facts
Households in the United Kingdom have experienced a significant fall in living standards since late 2021. As of June 2026, 60 percent of UK households reported that their cost of living had increased compared with the previous month. Although this was down from a peak of 91 percent in the summer of 2022, it is evidence of a persistent problem facing the country. The households that are experiencing increasing prices mainly attributed this increase to higher food, electricity, and fuel costs. The crisis is even more acute for the poorest UK households, which typically spend a higher proportion of their income on food and housing costs.
Reasons for the cost of living crisis
The 2022-2023 inflation surge was caused by supply chain disruptions triggered by the COVID-19 pandemic and by rapidly rising electricity prices following the Russian invasion of Ukraine in 2022. Although the UK economy returned to growth in 2021 and avoided high levels of unemployment, inflation reached levels not seen for decades in 2022. The CPI inflation rate reached a peak of 11.1 percent in October 2022, did not fall below double figures until April 2023, and took until May 2024 to reach the Bank of England's target rate of two percent. Furthermore, while wages are currently growing faster than inflation, this was not the case for twenty months between November 2021 and June 2023, when inflation consistently outpaced wage growth. Due to the crisis, real household disposable income in the UK fell by 2.2 percent in the 2022/23 financial year, representing the biggest fall in living standards since at least 1956.
Iran war drives new surge in prices
In response to soaring inflation, the Bank of England raised the Bank Rate to 5.25 percent by August 2023, before beginning a series of cuts that brought the rate down to 3.75 percent by the end of 2025. Although lower borrowing costs have offered some relief, inflation climbed back above the two percent target from late 2024 and sat at 2.6 percent in June 2026. The U.S.-Israel war with Iran, which began in early 2026, has added further strain: UK headline inflation forecasts were revised upward by 1.5 percentage points compared with pre-war expectations, driven largely by rising energy costs. Among those affected by the conflict, higher fuel prices were the most commonly reported impact. During the height of the crisis, low-income households faced noticeably higher inflation than wealthier ones, and the gap between wage growth and price rises eroded real earnings for millions of workers. With nearly a quarter of households still reporting they can't afford an unexpected expense, the squeeze on budgets looks set to persist.
