An updated overview of inflation, rising costs, income challenges, and support measures as of 2025.

The UK continues to face a profound cost of living crisis. Since late 2021, rising prices have outpaced wage growth, reducing real household disposable income (RHDI) and placing millions of families under financial strain.

This guide provides a clear, updated explanation of current inflation trends, the goods and services most affected by price hikes, government responses, and—importantly—practical support available to help households manage during this challenging period.

What Is the Cost of Living Crisis?

The term describes a period where incomes fail to keep pace with inflation, leading to reduced purchasing power. Despite some nominal wage increases, rising prices for essentials like energy and food have left households worse off in real terms.

Key facts:

  • RHDI fell 2.5% in 2022 and is projected to decline 2.6% in 2023.
  • The government provided £59.8 billion in support (2022/23) and £21.5 billion (2023/24), but incomes are unlikely to recover to pre-crisis levels until 2027/28.

Inflation reflects the rate at which prices for goods and services increase:

  • As of May 2023, CPI inflation was 8.7%.
  • The Bank of England targets 2% inflation, but it’s unlikely to hit this target until late 2024.
  • Inflation peaked at 11.1% in October 2022.

While inflation is slowing, prices remain elevated compared to 2021. A slowing rate means prices are rising more slowly—not falling outright.

Which Costs Are Rising the Fastest?

Several categories have seen sharp price hikes:

  1. Energy
    • Bills surged following global gas price spikes.
    • Without government intervention, average annual bills in early 2023 would’ve exceeded £4,000.
    • The Energy Price Guarantee capped prices temporarily; the Ofgem price cap (mid-2023) is £2,074.
  2. Food & Drinks
    • Staple items have soared: milk, eggs, and frozen vegetables rose 27%+ year-over-year (May 2022–May 2023).
  3. Transport & Fuel
    • Petrol prices increased sharply: an average bill of £1,100 in 2022 vs. £600 in 2021.
  4. Household Services
    • Plumbing, maintenance, and home repairs also rose, though less sharply than food and energy.

Why Are Prices Rising?

Key drivers include:

  • Global supply chain disruptions (post-COVID shortages)
  • Russia-Ukraine war (impacting energy and food exports)
  • Sanctions and market exits (adding costs in key sectors)
  • Dependence on European energy markets, exposing the UK to wider price shocks

Is Wage Growth Keeping Up?

In short: no.

  • Wages rose 5.8% (Feb-Apr 2023).
  • Inflation was 8.7% → real incomes still fell.The Office for Budget Responsibility projects similar trends for 2023.

Who’s Hit the Hardest?

The crisis isn’t felt equally:

  • The poorest 10% face inflation of 12.5%; the richest 10% face 9.6%.
  • Families with more children or higher energy needs suffer disproportionately.

The Joseph Rowntree Foundation reports 4.3 million low-income households going without essentials.

How Long Will It Last?

Inflation is projected to gradually decline in 2025, but high prices will persist. The government expects real incomes won’t return to 2021/22 levels until at least 2027/28—implying several more years of squeezed finances.

What Support Is Available?

Here’s a detailed list of financial help and resources available to UK residents:

Government & Council Schemes

Household Support Fund (HSF):

  • Grants or vouchers for food, energy, water bills, and essentials.

Cost of Living Payments:

  • No new national payments for 2025, but local schemes and HSF funds continue.

Discretionary Housing Payments:

  • Extra help with rent for those on Housing Benefit or Universal Credit.
  • Apply through your local council.

Council Tax Reduction:

Reduced bills for low-income households. Apply via your council.

 Energy & Utility Support

Energy Supplier Grants (apply via your supplier):

  • British Gas Energy Trust: Grants up to £2,000.
  • EDF Customer Support Fund
  • Scottish Power Hardship Fund
  • E.ON Next Energy Fund
  • Octopus Energy Assist Fund

Water Bill Help:

  • Social tariffs and the WaterSure scheme to cap bills for low-income or high-use households.

Ofgem Energy Cap Updates:

Stay updated: Ofgem Energy Price Cap.

Food & Essentials

Free School Meals & Holiday Vouchers:

  • Apply through your local council.

Healthy Start Scheme:

Food Banks:

Referral-based emergency food parcels from the Trussell Trust network: Find a Food Bank.

 Family Support

Sure Start Maternity Grant:

  • £500 one-off payment for first child: Apply Here.

Childcare Support:

  • Claim back up to £1,630/year in childcare costs via Universal Credit.

Health & Transport Help

NHS Low Income Scheme:

  • Reduced costs for prescriptions, dental care, glasses: Apply Here. 

Travel Discounts:

Older Person’s Bus Pass, Disabled Person’s Pass, Jobcentre Plus Travel Card → contact your council or Jobcentre.

The cost of living crisis continues to challenge households across the UK. While inflation is gradually easing, the affordability gap remains. Knowing what help is available and how to access it can provide vital relief during this extended period of financial pressure.

  • Check eligibility regularly as schemes and grants may vary by region and year.
  • Don’t hesitate to ask for help from councils, charities, or advice services.