Rapid rise in inflation a setback for millions struggling with the cost of living

“Today’s inflation rate rise to 9% is yet another setback for the millions of people struggling with the cost of living. Inflation has almost doubled in the last six months alone, making it the highest level in 40 years.

“Much of the increase in the inflation rate is due to the sharp rise in the energy price cap introduced on April 1st, which added almost £700 to the typical household energy bill. However, higher energy costs are not the only driver for higher prices.

“This week the Governor of the Bank of England, Andrew Bailey, warned of the uncertainty of the effect of the war in Ukraine on global food prices, which could push costs even higher. Consumers are already noticing higher prices on their shopping bills and our cost of living research shows that two thirds will change their food shopping habits (66%) with half of those saying they’ll reduce the amount of food they buy.

“If more people find it difficult to pay their bills, there is a concern that an increasing number could turn to borrowing and credit. Worryingly, our research found a fifth (21%) of people plan to borrow to help cover the higher costs they face. However, when the Bank of England increases interest rates lenders may increase the cost of borrowing; whether that’s on personal loans, credit cards or mortgages. While it’s understandable that some people will feel that borrowing is their only option, it could make their financial problems worse, not better.”

Background

Royal London’s research on the cost of living found:

• 95% of UK adults are concerned about the rising cost of living, with households across the earnings spectrum worried – as much concern among those with six-figure incomes as lower-earners
• Energy bills (92%), food shopping (87%) and cost hikes to phone and internet contracts (84%) are causing the most concern
• Worryingly, a fifth (21%) of people plan to borrow their way out of trouble, with 7% admitting they simply don’t know how they’ll cover increases and 5% saying they’re considering a short-term (payday) loan