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UK’s cost-of-living crisis is bad, and it’s about to get worse

World

UK’s cost-of-living crisis is bad, and it’s about to get worse

Increases in inflation, interest rates and taxes are about to make life harder for UK’s already struggling households

Stuart Trow

We talk about the UK’s cost of living crisis as if it’s a new thing. To some extent, this is understandable. The UK Consumer Price Index rose by 5.4% in 2021, the fastest pace since March 1992. The older, broader Retail Price Index (RPI), meanwhile, hit 7.5% in December — easily the fastest pace this century.

However, for most Brits, real wages were falling long before inflation accelerated beyond the Bank of England’s 2% target. Once they have been adjusted for RPI, median wages are lower today than they were at the time of the 2008 global financial crisis. And lower earners have been suffering for far longer. At the 25th percentile, wages have failed to match RPI every year bar one since 1987.

That said, things aren’t so bad that they can’t get worse. They’re about to for Britain’s most vulnerable families...

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