The UK cost of living crisis: what it is, when it started and where it stands

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The UK cost of living crisis is the squeeze on household budgets that began in late 2021, when the prices of energy, food and other essentials rose much faster than pay. Consumer price inflation peaked at 11.1% in October 2022, and average pay adjusted for inflation fell 3.0% in the year to December 2022 to February 2023.

The term is not an official statistic, so this page uses the official series that describe it: inflation from the Office for National Statistics (ONS), the energy price cap set by Ofgem, the government's Energy Price Guarantee, real pay, Bank Rate and what people told the ONS about their own costs.

When did the cost of living crisis start?

No body has set a start date, but the data place it in the second half of 2021. UK CPI inflation was 2.0% in July 2021, 4.2% in October 2021 and 5.4% in December 2021, already well above the Bank of England's 2% target.

People felt it at the same time. In the ONS Opinions and Lifestyle Survey, 62% of adults said their cost of living had increased in November 2021. By March 2022 the figure was 87%, around 9 in 10. The most common reasons given in March 2022 were the price of food shopping (88%), gas or electricity bills (83%) and the price of fuel (77%).

Why did energy bills rise so much?

Households in Great Britain on a standard (default) energy tariff pay prices limited by Ofgem's default tariff cap, which is updated as wholesale and other costs change. In its letter of August 26, 2022, Ofgem announced that from October 1, 2022 the cap for a typical dual fuel customer paying by direct debit would rise to £3,549 a year, an 80% increase on the previous level. It said wholesale costs had risen by £1,391 since the last update, "primarily due to the invasion of Ukraine by Russia." Ofgem points out that the cap sets maximum prices, not maximum bills: the £3,549 is a typical bill, and households using more energy pay more.

Energy costs also feed into the prices of many other goods and services. Our page on what causes inflation explains how cost shocks like this spread, and inflation after COVID compares the UK with the US.

What was the Energy Price Guarantee?

On September 8, 2022, the government announced the Energy Price Guarantee. From October 1, 2022, it limited what suppliers could charge per unit, so that a typical household would pay around £2,500 a year instead of the higher Ofgem cap, with the government covering the difference. It came on top of a £400 energy bills discount for all households, and the government said the guarantee alone would save a typical household at least £1,000 a year based on October energy prices, in addition to the £400 discount.

The guarantee stopped binding once wholesale prices fell. Ofgem's letter for July 1, 2023 set the cap at £2,074 a year for a typical household, £426 or 17% below the £2,500 Energy Price Guarantee level that applied from April to June 2023.

What happened to wages?

Pay rose, but not as fast as prices. The ONS reported that in December 2022 to February 2023, regular pay fell 2.3% and total pay fell 3.0% on the year in real terms (adjusted for inflation). A larger fall in real total pay was last seen in February to April 2009, during the financial crisis, when it fell 4.5%. The ONS said the 2023 fall still remained among the largest since comparable records began in 2001.

That has since turned around. In the ONS release of September 15, 2026, real regular pay grew 0.6% and real total pay grew 0.9% in May to July 2026, adjusted using CPIH (the CPI including owner occupiers' housing costs). Growth in real terms does not mean pay has made up all the ground lost in 2022 and 2023.

How did interest rates affect households?

The Bank of England raised Bank Rate to bring inflation down. From 0.1%, set in March 2020, it made its first rise to 0.25% on December 16, 2021, and then 13 more, reaching 5.25% on August 3, 2023. That raised costs for borrowers whose mortgage rates followed Bank Rate or who had to refinance. Cuts began on August 1, 2024, and Bank Rate has been 3.75% since December 18, 2025.

How did people cope?

The ONS survey of November 2021 to March 2022 recorded how households adjusted. In March 2022, 54% of adults said they were spending less on non-essential goods and services. The share using less gas or electricity rose from 28% in December 2021 to 45% in March 2022. Around 23% said it was very difficult or difficult to pay their usual household bills, and 43% said they would not be able to save money in the next 12 months, the highest since the question began in March 2020. Some of the price rises were less visible: smaller packs at the same price, covered in our page on shrinkflation.

When will the cost of living crisis end?

We do not forecast, but the latest data show where things stand. Inflation has fallen from 11.1% to 3.1% (August 2026), which is still above the 2% target. Prices are rising more slowly; they are not falling back to 2021 levels. Real pay is growing again.

Households still report pressure. In the ONS survey of August 5 to 30, 2026, 55% of adults said their cost of living had increased compared with a month earlier, down from 79% in April 2026. Among them, 94% cited food shopping, 72% fuel and 64% gas or electricity bills. The cost of living (89%), the NHS and the economy were the issues most often named as important facing the UK, as they have been since the ONS started asking in October 2022.

For decisions about personal finances, the answer depends on each household's situation. In the UK, the MoneyHelper service and the Financial Conduct Authority's consumer pages are the places to start.

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