Key facts
- UK households are £2,900 (7.9%) worse off due to inflation since 2021.
- Prices are nearly 30% higher in August 2026 than in July 2021.
- Energy bills more than doubled by autumn 2022.
- Food inflation peaked at nearly 20% in March 2023.
- 28% of UK residents cannot afford an £850 emergency expense.
- 23% of UK residents cannot afford a week's annual holiday.
Five years of successive cost of living crises have significantly impacted household incomes and finances across the UK, with inflation delivering the equivalent of 13 years of normal price increases. According to analysis by the Resolution Foundation, typical working-age households are £2,900 (7.9 per cent) worse off this year compared to a scenario with stable 2 per cent inflation.
The surge in prices, driven by factors including the post-pandemic supply shock, the invasion of Ukraine, and conflict in the Middle East, has seen inflation peak at 11.1 per cent. Prices are nearly 30 per cent higher in August 2026 than they were in July 2021. Energy bills more than doubled by the autumn of 2022, and food inflation reached a peak of nearly 20 per cent in March 2023. Services inflation also hit a three-decade high of 7.4 per cent in July 2023.
The impact has not been evenly distributed, with essential items making up a larger portion of spending for lower-income households. This has resulted in a roughly one-sixth larger increase in non-housing costs for the poorest tenth of households compared to the richest tenth. Real median income after housing costs for non-pensioners is projected to fall by 1.3 per cent (£450) between 2020-21 and 2026-27, with incomes at the 25th percentile set to decrease by 1.2 per cent (£270), while better-off households at the 75th percentile are expected to see marginal growth of 0.3 per cent (£130).
Analysis by Carnegie UK, using data from its Life in the UK index, indicates that while some pressures have eased since 2023, improvements are not universal. Currently, 6 per cent of people across the UK cannot afford enough food for their household, a figure unchanged in four years. Twelve per cent cannot afford to keep their homes adequately warm, though this is the lowest figure since the survey began in 2023. A significant 28 per cent of people cannot afford an £850 emergency expense, a figure that has also remained stagnant. Furthermore, 12 per cent of people cannot afford to socialise monthly, and 23 per cent cannot afford a week's annual holiday, a two percentage point increase from 2025.