When the financial markets collapsed following the 2007-2008 crisis, families all over the world began to feel the pinch almost immediately. Wescot has put together this guide to why the cost of living has increased by so much and to highlight some of the biggest drains on a family’s income. What is more, despite figures in recent budget reports suggesting that the economy is growing, the fact remains that the cost of living is disproportionately high and those in the poorest households were effected the most.
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Rising Utility Costs
During the period of 2010 and 2013, the cost of simply heating our homes went up by 37% on average, which is eight times faster than wages were going up. The global financial crisis was just that, global, which meant that oil and gas wholesale prices increased and utility companies then had to match that in order to still operate. It comes as no surprise then that when winter rolls around again, some of the poorest households were reluctant to put the central heating on for fear of a hefty bill.
A considerable amount of people contacted the Citizen’s Advice Bureau for advice about utility prices during this time. More than a quarter of the people who did so, also revealed that they had debt issues, which further highlights how precarious the situation was at the height of the credit crunch. Additional figures from Ofgem at the tail end of November 2013 stated that 1.4 million electricity and 1.2 million gas energy accounts were in arrears and that was just before the annual price hike for the peak period between December and March.
It is easy to see just from those figures how a dramatic increase in the cost of supplying such a basic need can impact the average family, and more importantly those families with the smallest incomes. Utility prices have since seen a drop but it has taken more than five years before customers can comfortably put the heating on.
Petrol Price Woes
As much as utility prices were governed by the rise in crude oil price, naturally it follows that petrol prices saw a huge increase following the 2008 financial crisis. In fact, it is only recently that the cost of filling the family car up has come down by a significant margin, at an average of 106p per litre. Less than six months ago, that cost was riding high at 131p, having shown little variation since 2009.
Interestingly enough though, the AA has revealed that despite the low price, motorists are not using their cars more often but simply using the money that they have saved by travelling the same distance to pay for other things such as clothing and food. Once again, the financial status would reflect that many people, instead of using their cars to go further afield, are still cutting corners, and saving wherever possible.
Sharp Rental Costs Rise
If putting petrol in the car and heating your home was not expensive enough, paying to keep that roof above your head rose by a significant amount just after the credit crunch. In most areas too, rental prices have remained high too despite falling inflation. For 2013, if you rented in London, you were looking at a typical cost of £1126 pcm, an increase of 4.8% on the same period in the previous year.
Crude oil cannot account for high rental prices however, this time the increase is due to stalls in the construction industry, resulting in far fewer houses being built while the economy was recovering. Unfortunately, for most people the easiest option in the short term is to start renting, and adding to the problem even more.
Unavoidable Factors
The three areas highlighted above are some of the primary causes for the general rise in living costs for UK families. Sadly they are also three expenditures that most people cannot live without, and are responsible for tightened belts across the country. It pays off to shop around and try to find the right utility supplier or the right rental price and even though the economy is growing once more, save money wherever you can.