The burden of the cost of living crisis is being felt in every corner of the UK. Nationally, the picture is clear, but much less is known about how the rising cost of living is playing out geographically and what this means for people living in different places across the country.
This report sets out what the cost of living crisis is, its drivers, and how the squeeze on disposable incomes is likely to be felt across the UK’s cities and largest towns.
It also launches a new cost of living tracker, tracking city-by-city inflation and wage figures to monitor where inflation is hitting hardest, how prices and wages are rising across cities and large towns, and the impact of mounting prices on money in worker’s pockets.
Using a city-level inflation estimate, developed for the first time by Centre for Cities and analysis on wage growth, the report finds that:
There is a geography to the cost of living crisis
Inflation is higher in the UK’s poorest cities. Households in Burnley, Blackburn and Blackpool will likely see higher inflation compared to those in southern cities like London, Reading and Cambridge.
The report finds that energy and petrol consumption account for most of the differences between places, influenced by:
- The nature and quality of housing stock
- Vehicle usage and spending on petrol
- Income levels
Inflation is only one part of the equation, wages also play a part.
When prices grow faster than nominal wages, consumer spending power is squeezed.
In real terms, wage growth has failed to keep pace with inflation in all 63 cities over the past year, but the cities that have low nominal wage growth and high inflation rates experienced a particularly severe downturn. These places are typically located in the North.
In most places, the Government support package isn’t enough to offset inflation
The Government’s support package varies across the country and while welcome, is not based on actual energy needs and fails to consider the fact that energy demand is influenced by the energy efficiency of housing stock.
This means that unless additional targeted support is provided, for many places, particularly those in the North, energy bills are likely to jump even higher when the price cap is lifted in October.
What needs to change?
In the short term, the Government should support people’s immediate spending needs by:
- Increasing benefits now (as opposed to April 2023) to bring them in line with inflation
- Reintroducing the £20 uplift for Universal Credit
- Providing a one-off payment to households in dwellings below EPC band C
In the medium to long term, Government should look to implement policy to help mitigate the impact of inflationary shocks in the future. These include:
- Accelerating the retrofit agenda, by reintroducing the Green Homes Grant Scheme and bringing forward the Future Homes Standards regulation
- Encouraging general economic growth, more specifically to ‘level up’ and counter the increase in the cost of living
