The cost of living crisis
The cost of living crisis is being caused by an increase in the price of everyday essentials, such as food, fuel and your household bills - but why is it happening.
16. June 2022
With the worst of the COVID-19 pandemic hopefully behind us, the UK faces yet another bump in the road. The current cost of living crisis looms over the nation, meaning that Brits can expect to feel the pinch now and into the future. But what is the cost of living crisis, and how will it impact you?
The cost of living crisis is being caused by an increase in the price of everyday essentials, such as food, fuel and your household bills - but why is it happening? Some of the factors that are to blame for this spike in prices include rising demand for oil and gas in combination with the uncertainty of supply due to the Ukraine conflict. Other contributing factors include supply chain disruption in addition to staff shortages across various industries triggered by the pandemic. In April of this year, inflation hit a high of 9%, and the cost of energy for UK households rose by a staggering 54%. Energy bills are set to increase even further in October, so the cost of living crisis is expected to continue for some time yet.
As part of our recent campaign, we surveyed 1,000 UK people to shine a light on how the general public feel about the current economic climate and what they are doing to navigate this testing time.
Coping during economic crisis
In times of economic hardship, you may notice that your money does not go as far as it previously did. To get a feel for how much people have left in their pay packets at the end of each month, we asked our survey respondents how much disposable income they have once all bills are paid for.
Over a quarter of respondents (26%) said they have £100 or less, while nearly one in five (19%) stated they have £100 to £200. Slightly fewer people (16%) said they have £200 to £300, 12% revealed they have £300 to £400 and just over a quarter (26%) of people are left with anything from £500 to £1,000 or more.
Since the cost of living crisis is currently affecting the majority of people in some way, it’s no surprise that it’s a hot topic of conversation right now. In fact, our survey found that 36% of respondents discuss energy prices once a week, while 18% of people chat about it once a day. A further 38% talk about these rising costs ‘every so often’, showing that the cost of living crisis is clearly on our minds.
But who are we having these discussions with? Nearly a quarter (24%) of our respondents said they are talking about these rising costs with their friends, while 22% discuss the topic with their partners and one in five people chat to their parents. These conversations aren’t just happening at home either, with 20% of people taking their thoughts to the office to have discussions with their colleagues.
With the price of essentials like groceries, household bills and fuel going up, your first instinct might be to re-evaluate your outgoings in an attempt to save money. But what are people doing to manage their finances during these trying times?
Cutting back on life’s luxuries
We asked our survey respondents about the changes they’ve made in order to cut costs. Nearly one in six people (16%) said they have made a conscious effort to reduce their weekly shop. Meanwhile, another 16% said they’re buying fewer luxury items in a bid to save money, while 11% of people have cut back on entertainment and leisure activities, such as making fewer trips to the cinema and cancelling gym memberships.
Nearly one in 10 people (8%) have even made an effort to drive less frequently, using public transport as a way to avoid spiking fuel prices, while the same number of respondents said they have been shopping around for better deals with their energy providers. Other answers included cancelling TV and movie streaming services, with 7% of people cutting back on subscriptions such as Netflix and Disney+.
Office vs home working
We also asked our respondents if they were likely to return to the office full-time as a way of minimising household bills - and the answers were mixed. Over a third (36%) of our respondents were ‘likely’ or ‘very likely’ to consider ditching home working in favour of returning to the office. A similar number (35%) of respondents feel ‘neutral’ about or ‘not likely’ to change where they work in the hopes of reducing their outgoings.
Just over a fifth (21%) of our respondents have even found further employment, starting second jobs as a way to boost their income. When asked what type of side hustles they’re undertaking, 29% of respondents said they sell products via sites such as eBay and Etsy, while other answers included mystery shopping (7%) and offering a service (6%), such as babysitting or gardening.
Support from the UK government
While the general public is making changes to their lifestyles in order to cope with the current economic crisis, there is huge pressure on the UK government to step up and do something about it too. The government has said it will provide £37 billion of support this year, targeting those who need help the most. The types of support available from the government include help with energy bills, a council tax rebate for specific council bands and extra payments for those on benefits, those with disabilities and pensioners.
Relating to this, we asked our survey respondents what else they think the government could do to help support the cost of rising energy prices. Nearly half (45%) of people said there should be a lower price cap on energy bills, while 17% said the government should provide more energy bill discounts, on top of the £400 grant for all domestic energy customers in Great Britain. Other answers included more windfall taxes on energy companies (11%) and higher taxes on households with higher income (11%).
According to Andrew Bailey, the governor of the Bank of England, the cost of living crisis is not expected to ease for at least another year, lasting until around 2024. With this in mind, if you haven’t already, you may want to start making changes to help bring down your outgoings.
We asked our respondents if rising costs have changed their attitude towards consumption of food, petrol and energy. Unsurprisingly, over half (64%) of people said they have made a conscious effort to reduce their consumption. On the other hand, 19% of people admitted to not having changed their consumption at all.
So what can you do to ease the financial pressure you may face as we move forward through these hard times?
First and foremost, we know that many smart appliances have been designed to be more energy efficient. However, these gadgets often have a higher upfront cost. We asked our survey respondents if they would consider purchasing such appliances, even if it meant paying a premium price in the first instance but with the potential to save in the long run. Nearly two-fifths (39%) of people said they are ‘somewhat more likely’ to swap their appliances for smart gadgets, while nearly a third (32%) were undecided, choosing to answer ‘neutral’.
Purchasing an electric car, or even a hybrid, is another way to keep costs down because it means you will no longer need to visit the fuel pump or your fuel usage will reduce. But how many of our survey respondents would trade in their vehicle for a more eco-friendly set of wheels? Our data shows that 28% of people would consider switching to an electric or hybrid car in the next two to five years, while 15% would think about making this change within the next 12 to 24 months. Interestingly, nearly a third (30%) of people said they would not consider buying one until petrol and diesel cars are banned, which is expected to be in 2030.
Get straight to the (energy) source
With energy bills set to significantly rise again in October, you might be wondering how you can avoid being stung by this inevitable increase. We asked our respondents to choose what’s most important to them when it comes to energy sources since energy costs have increased, whether this is gas or electricity. Unsurprisingly, the majority (84%) of people answered that they feel the cost of their energy source is of the greatest importance to them. Meanwhile, just 11% of people said that the sustainability of their energy source is most important to them - but what if you could benefit from an energy source that’s both cost-effective and eco-friendly?
At Viessmann, we offer a wide range of heating solutions, some of which stand to save you up to 30% on your heating bills while also reducing your environmental impact. Using innovative technology, our heating products deliver both comfort and convenience, as well as offering high performance and efficiency.
There’s no denying that the cost of living crisis is affecting people up and down the UK, and it’s clear from our data that many people are concerned about this and are making changes to help ease the financial pressure it will bring.
How has the cost of living crisis impacted you so far, and how do you plan on managing your energy usage now and into the future? Join the conversation using #BritsOnCostOfLiving.