Cost of Living Crisis UK: Causes, Impact, and Solutions

What Is the Cost of Living Crisis in the UK?

The cost of living crisis in the UK refers to the strong consumer demand and less supply chain gap. It leads to higher costs of consumer goods, approximately 56% of Britons are affected by the cost in UK.

The UK, indeed, is one of the richest countries, the 6th largest in terms of GDP. However, that does not mean that every person is rich. Only 1% of its population is wealthy, and the rising crisis in UK worsens the situation even more.

Causes of the UK Cost of Living Crisis

Having hands-on knowledge about the causes enables citizens and the government to overcome and manage the UK cost of living crisis effectively.

1. Inflation: COVID-19 triggers an inflation crisis of living in UK. In 2021 and 2022, due to supply shortages, prices were affected severely. The inflation during the pandemic was the combination of the demand-pull and cost-push duo.
2. Interest Rates: Since the 2009 global financial crisis, interest rates have been near zero. It was a strategic move to promote economic growth. Because of rising inflation, banks start to increase their interest rate, which further worsens the living cost of living crisis UK, and affects the lives of Britons.
3. Russian–Ukrainian War: When the UK started to rise again, war broke out between Russia and Ukraine. It led to a supply shock and a hike in prices of oil, gas, energy, and food. The blockage of Ukraine caused a global shortage of wheat, sunflower oil, and maize. This further caused the cost-push inflation.
4. Inequality: Income inequality between groups of people was the major cause of the cost crisis in UK. As per the report of Bank of England reports, 90% of the income accounts for tax payments for lower-income people, whereas 45% for higher-income clubs.

Whether the high living cost in UK is caused by inflation or because of income disparity, it affects the life of common people in different ways.

How Does the Cost of Living Crisis Affecting People in the UK?

Most of the people have made severe cuts to their spending, and 61 % expect to make in the near future. Let us see what the cost of living crisis UK statistics reveal:

1. Energy Prices: In the last few years, energy prices are skyrocketed. 39% of people say that they are struggling to afford their energy bills.
2. Food & Utility: Food and other utilities are also severely affected by the crisis of living costs in UK. The pressure has been further increased from 1 April, as the rise in the energy price cap. 19 % were not aware of the looming hike in prices.
3. Women (More impacted): Around 60% of the women are more likely affected than men. It leads to gender vulnerability and impacts the well-being of a woman.

Moreover, the UK is the hub for international students as well. Thus, it impacted the students more as compared to locals.

Impact of Rising Cost of Living on Students

As per the survey of The Higher Education Policy Institutes (Hepi), around 10,000 students accept the fact that the cost of living crisis in the UK, hampering their performance in academics. Thus, the following points are given to explain the adverse impact of the cost-of-living crisis:

1. Extra Work Hours: 34% of students in 2021 had jobs while in college, 45% in 2022, and 55 % in 2025. It reflects the need to work for extra money, thus compromising their college experience.
2. Loan Amendments: From 2023, loan amendments impact students and existing borrowers. For the new one, joining from September 2023, the minimum threshold student loans will be repaid is lowered to £25,000. It will affect the budget of international students.
3. Rising Food Prices: As per the survey of Sutton Trust, one in four students is skipping meals to save money. Around 63% spend less on food, and 28% skip meals to save money.
4. Accommodation Crisis: The Rent of student accommodation in UK was impacted by the living crisis in the UK. Approximately 50 % of students reported housing concerns; therefore 25% started their looking for accommodation earlier.
5. Well-being & Studies: Lastly, the cost of living crisis threatens the mental health of students. Because of this, students never go out with their friends and batchmates, which leads them into a condition of isolation.

Well, the cost of living crisis UK impacts students and the common man equally, but in different styles. This scenario cannot be continued. The government have taken various support policies. 

Government Response and Support Measures

In crisis periods, government policies work as a life saviour for their citizen. Thus, let us understand the cost of living crisis facts UK with the help of the following support measurements taken by the government:

1. Department for Work and Pensions benefits that are linked to inflation were uprated by 6.7% in April 2024. For 2024-2025, the basic state pension and new state pension were increased by 8.5% in line with average earnings.
2. The government provided significant support through the energy price guarantee, cost of living payments, energy bill support and other policies.
3. From the student perspective, living cost loans and grants have risen by 2.35 and 261 million pounds in student premium financing.
4. Thresholds in income tax have been fixed at their level of April 2021 to prevent them from increasing with inflation.

The government are the first one who take quick steps for policy-making related to the economic crisis, but at the end consumer level, we have our responsibilities.

What Can Individuals Do to Cope?

Follow the below ways to manage the crisis of living in the UK:

1. Be mindful of your expenditures and plan your monthly budget.
2. Do savings in the digital market, like stocks and funds, in the long term, but make sure you have an emergency fund.
3. Increase the energy efficiency of your home and space by installing cavity wall insulation, smart heating and LED bulbs.
4. More than 9.5 million tonnes of food is wasted every year in the UK. Thus, consume according to your capacity.
5. Be cautious while shopping, as many providers, especially technology and insurance, increase prices, and often exploit clients who refuse to move.
6. Inflation on food is very high, so buy them in bulk to avoid the cost of living crisis.
7. You can get cashback on your buying through their website, but do not be tempted just for the cashback.
8. Ask for a pay hike from your employer. As inflation rises, the minimum wage in UK should be increased simultaneously.
9. You can transfer your bank account to a new provider, which offers an interest-free period on your credit card debt.
10. If you are an international student, choose the university that provides financial assistance.

These are certainly smart and economical ways to deal with the inflation-led situation at your end.

Future Outlook: What Happens Next?

However, inflation has fallen to normal levels, as it fell to 2.6% in the year to March 2025. It is slightly below 2.8% in February. It was still above the target of the Bank of England's inflation rate of 2%.

It is much lower than the high inflation, but the lower inflation does not mean prices are falling. There will be ever-rising, but just at a slower rate. People are still feeling the impact, and families are struggling with debt.

Therefore, we need plans for the cost of living, like boosting incomes, ensuring essentials that are reliable and bringing higher taxes on wealth. This way, we can tackle the unseen event in future.

Conclusion

So here we are! The cost of living in UK is a crisis for now. The blog extensively covers the causes and impacts on common men and students. We have also discussed the way to cope with the situations by planning your finances, being mindful of your expenses, and smart consumer choices. It will help you in dealing with the cost of living crisis. Moreover, keep tabs on the government's steps and measurements to lower your cost of living. Even if you have doubts regarding affordable student housing, you can contact GraddingHomes.com. Their experts will help you find the right way.

FAQs

1. What are the main causes of the cost-of-living crisis in the UK?

High inflation, pandemic, and stagnant wages are the real causes of the cost of living crisis in the UK. Moreover, austerity measures, tax increases, and shortened benefits have contributed to the crisis. All these factors impact food & energy prices and increase the rent for student accommodation.

2. Who is most affected by the cost-of-living crisis?

Well, it impacted the lives of people, but the following are the worst affected:

1. Low-income households
2. Disabled people
3. Women
4. International students
5. Deprived area residents

3. What support is the UK government offering?

Financial support, like the household support fund, universal credit and business support schemes, like the coronavirus job retention scheme. Moreover, the government specified specially designed areas with facilities to attract investments, known as enterprise zones.

4. How can I reduce my living expenses during the crisis?

Lowering your energy consumption, cutting food costs, and being mindful spending on transportation and outings will save you money from overspending in the crisis period. Moreover, you can cancel unused subscriptions, like streaming services or gym memberships.

5. Does the crisis affect student accommodation or housing?

Yes, the cost of student accommodation in UK college halls increased by 60% in the past decades. Private rooms, around 24% are more expensive than the institutions provide. UK's cost of living crisis greatly affected the success rate, and hence became the victims of stress.