The ongoing UK cost of living crisis has stretched out for what seems like an eternity. While inflation rates have now stabilised to more “normal” levels, the worst of the crisis saw prices skyrocket at rates not seen in decades, while wages lagged far behind. So, is the crisis finally nearing its end, and will prices ever come down?
In July 2024, inflation rose slightly to 2.2%, marking the first increase of the year. This figure is still close to the Bank of England’s target inflation rate of 2%, which was achieved in May and June, bringing some relief to UK households. However, lower inflation doesn’t necessarily mean prices are dropping – they’re just rising more slowly.
Inflation and Its Impact on Daily Life
Inflation refers to the rate at which prices for goods and services increase. While the inflation rate in July 2024 was 2.2%, this simply means that prices, on average, are 2.2% higher than they were a year ago. For many, this still feels like a squeeze on their wallets, as grocery bills, energy costs, and everyday essentials remain stubbornly high.
To truly understand how inflation affects you, consider how much more you’re paying for basic items like groceries. Online resources like price comparison websites can give a clearer picture of just how much prices have increased recently.
Will Prices in the UK Ever Decrease?
The simple answer is that prices in the UK are unlikely to fall significantly. Inflation would need to drop into negative territory – called deflation – for this to happen. However, deflation is extremely rare. The last time it occurred was in 2015, when prices dropped by a mere 0.1% due to a fall in oil prices.
Despite this, there is hope that wages will eventually catch up with rising costs. The idea is that as wages increase, people will feel the pinch less. However, a full recovery may take time.
When Will the Cost of Living Crisis End?
The UK cost of living crisis will be over when prices stabilise, and wages have risen enough to offset the increases. According to recent data, annual wage growth (excluding bonuses) was 6% up to June 2024, with real wage growth at 2.3% after adjusting for inflation. This suggests that we are starting to see some improvement, but it will take time for families to fully recover.
Unfortunately, many people have already experienced a severe drop in living standards. The financial year 2022-2023 saw the largest decline in living standards since records began. The Office for Budget Responsibility (OBR) predicts that living standards should return to pre-pandemic levels by 2025-2026, two years earlier than initially expected.
Real Wages and Future Prospects
While progress is being made, real wages today are still lower than they were in 2008. The Trades Union Congress (TUC) estimates that if wages had continued to grow at pre-crisis levels, workers would be over £14,000 better off annually. This gap has contributed to a rise in low-paid, insecure jobs.
Additionally, unemployment is on the rise, reaching 4.4% between February and April 2024, the highest rate since 2021. This adds further pressure to households already struggling to keep up with mortgage payments, rent, and day-to-day expenses.
While inflation may be lower, many households are still grappling with debt and high housing costs. Until wages catch up and the job market stabilises, the UK cost of living crisis is far from over.
