Inflation is impacting the cost of living across the world, but the UK in particular seems to be taking a large hit. Prior to the pandemic, the level of poverty in the country was at an all time high and, with a long period of cuts to social security, support for low income houses fell. The impact of the pandemic has been (and will likely be) long lasting, so far impacting low income houses the most, but likely to impact everyone.
Impact on Households
The number of people using food banks has increased significantly over the past year, with households needing support to feed their families. With the cost of energy souring, many households are having to choose between food or heat this Winter. Support is needed to help those struggling, to not only save the economy but for public health too – the NHS is struggling to stay afloat and requires government support.
Energy Price Guarantee
The biggest cost of living impact that we have seen is on energy and, with the colder months drawing in, it’s a worry for households up and down the country. However, the government has introduced a fixed cost of energy from April 2023, where the typical household will pay £3,000 per year on energy.
Energy Efficiency
With energy prices rising, there is a push for households to become more energy efficient, and the government is offering support for improvements.
Impact on Businesses
The cost of living crisis impacts not just households – but businesses too. With the rate of inflation increasing, businesses are finding it harder to make profits, with a decrease in revenue. This is partly due to people buying less due to lower income, meaning businesses are fighting a more competitive environment to win sales. But rising prices may not be the answer to balancing the books, as customers may not have the money to shop. This creates a lose lose situation for businesses, where they are stuck between increasing prices but losing customers, or decreasing prices but struggling with rising overhead costs.
One way in which businesses can manage the impact that the cost of living has on sales, is to source domestically – this will remove import costs and lower transportation costs. In addition to this, domestic supply chains may be more resilient against geological specific events.
To maximise sales, businesses can also focus on ways to help customers while ensuring they maintain their business, offering loyalty discount schemes, cashback rewards, or introducing payment instalments – which are even more essential during the festive period.
Impact on Individuals
Cost of Living Payments
The government is offering numerous payments and schemes to help those in need following the cost of living crisis. The additional payments are in 2023 and 2024 and could include from £150 – £900 payments for your household. What’s more, households eligible for tested benefits will receive an additional cost of living payment, in more than one payment.
National Living Wage
The cost of living crisis is impacted by the wages people receive, and to tackle this the government will increase the National Living Wage by 9.7%, calculating to £10.42 hourly rate for workers over the age of 23. Apprentices and those on National Minimum Wage will also see a rise. With higher wages, people are able to afford food and energy more, meaning less people struggle. It also means if people are spending more, money is poured back into the economy.
Pensions
Research shows that more people are taking their pensions now due to the cost of living crisis. In the Autumn budget, the Government announced that it will increase the State pension in April 2023 in line with either inflation or wages – whichever is highest. In the Autumn Budget it was also revealed that pensioner households across the UK will receive an additional £300 cost of living payments to help with bills. This is because pensioners are disproportionately impacted by higher energy costs and are unable to increase income through work. The payment will be tax free and will not have any impact on existing benefit awards.
If you need help with how the cost of living crisis is impacting your business, contact James & Uzzell now.