2021 saw the cost of living rise substantially, not only for the consumer but for the producer also. Each month, the ONS (Office for National Statistics) examines how much the cost of living has inflated by and compares it to the data from the previous year, this is known as the Consumer Prices Index (CPI).
In recent months, the ONS has found that “Consumer Prices Index (CPI) rose by 4.2% in the 12 months to October 2021”. However the study also found that the annual rate for the Services Producer Price Index (SPPI) showed “positive* growth of 3.6% in Quarter 4 (Oct to Dec) 2021, up from 3.4% in Quarter 3 (July to Sept) 2021.”
*Positive growth is classed as helping boost consumer demand and consumption, driving economic growth.
Whitten & Co wanted to explore this study and ask whether consumers and businesses have felt the pressure of the rise in cost of living, and what has been the leading cause of financial pressure.
“I’d say covid has had the most noticeable impact,” explains self employed beautician, Jo. “We now have to buy PPE which we didn’t before, we have less clients in a day to comply with social distancing, and obviously we’ve had several long periods of no income due to lockdowns with no financial help.”
In a poll we asked ‘Have you found yourself struggling [financially] more in 2022?’ and a staggering 75% said they were struggling more in the new year, with the majority saying they normally don’t struggle quite this much post Christmas.
According to an article published by BBC news on January 18th, salaries are still above pre-pandemic levels. Average weekly pay, excluding bonuses, rose to £550 in November compared with £510 in March 2020, but the average consumer is still finding it difficult to keep up with the cost of living. The main issue being petrol which is currently £1.40 per litre, the highest it’s been in almost a decade.
“I used to spend roughly £30 every ten days on fuel, but now it’s more like £40 per week.” Says sales associate Jack.
We asked a small group of drivers if they thought that the rise in fuel prices was fair due to the cost of everything else also increasing; 79% believed it wasn’t justifiable by fuel companies, whilst 39% of the group said they now actively avoid driving (when possible) as to not use their fuel.
Although, for now, working from home is still actively encouraged it does pose the question: will businesses suffer through the heightened price of petrol? As employees will find it more and more expensive to get into work, and companies that rely on transporting goods may find their budget for fuel increasing, causing more problems on top of the already ongoing HGV driver shortages as a result of Brexit. An article by My Tutor suggests that because most UK businesses are “heavily dependent on fuel” that the rise of fuel prices will affect every business in the UK, and that the effects will “vary from sector to sector” including retail and agriculture being some of the harder hit areas.
Rent has also seen an increase due to the cost of living rising dramatically; both the consumer and businesses have been suffering more and more at the hands of expensive rent. Excluding London, private rents throughout the UK went up by an average 6% in one year with the south west of England seeing the biggest increase. Property website ‘Zoopla’ said this was a 14-year high.
Art Director Jade said that moving house in 2022 has been difficult for her and her partner as the property market moves so quickly. “It feels like rental prices are creeping up.” She explains. “Our current house is valued at £1100 per month which we thought was expensive when we initially signed our contract, but we have seen smaller houses go for much more.”
It’s not just for private rentals, businesses have seen the price of rent rise over the last few years due to inflation affecting retail, office and industrial companies. According to the Statista Research Department in the first quarter of 2021 and the second quarter of 2021, prime rent of office and industrial real estate in the UK grew by 1.4 and 1.5 percent.
The only possible silver lining to come from the rise in the cost of living is the minimum wage increase to £9.50 per hour, being introduced in April, which will be critical to see if this helps with the cost of living and affordability of living in the UK. The next few months will be the most important in showing whether the cost of living is too high and what will happen if this is the case.