UK Cost of Living Crisis 2025: Is It Over and What Are Households Still Struggling With

The UK cost of living crisis may have eased from its 2022-2023 peak, but for millions of households it is far from over. While inflation has fallen from 11.1% in October 2022 to 2.6% in November 2024, the cumulative impact of two years of soaring prices means that essential costs remain 20-30% higher than before the crisis began. Food prices are up 27% since 2021, energy bills are up 42%, and rents are up 20%, according to Office for National Statistics (ONS) data. Real household incomes are finally growing again after two years of decline, but they remain 3-4% below pre-pandemic trends, meaning most families have not yet recovered the living standards lost during the crisis. Around 7.2 million people in the UK live in absolute poverty (after housing costs), including 4.2 million children—levels not seen since the 1990s, according to the Joseph Rowntree Foundation. Food bank usage has reached record levels, with the Trussell Trust reporting over 3 million emergency food parcels distributed in 2023-24. Here is the reality of the cost of living in 2025, which households are still struggling, and where help is available.

How much have prices actually risen?

While headline inflation has fallen to 2.6%, this measures the annual rate of change in prices, not the cumulative increase since the crisis began. To understand the true impact on household budgets, we need to look at how much prices have risen in total since 2021:

Food and non-alcoholic beverages: +27%

Food prices surged in 2022-2023 due to the Ukraine war (disrupting wheat and fertiliser supplies), poor harvests, and higher energy costs increasing production and transport costs. Food inflation peaked at 19.2% in March 2023—the highest since 1977.

While food inflation has now fallen to around 2% annually, prices remain 27% higher than in 2021. For a family spending £100 per week on food in 2021, the same basket now costs £127—an extra £1,400 per year.

Energy (gas and electricity): +42%

Household energy bills nearly tripled between 2021 and 2023, driven by Russia's invasion of Ukraine and the resulting gas supply crisis. The average annual bill rose from around £1,200 in 2021 to over £3,500 by late 2022 (before government support capped bills at £2,500).

Energy bills have since fallen to around £1,700 per year as of late 2024, but this is still 42% higher than in 2021—an extra £500 per year for the average household.

Housing (rents): +20%

Private rents have risen sharply due to a chronic shortage of rental properties. The average UK rent is now around £1,200 per month, up from £1,000 in 2021—a 20% increase. In London and the South East, rents have risen even faster, with many areas seeing increases of 25-30%.

For renters, this adds around £2,400 per year to housing costs compared to 2021.

Transport (fuel, public transport): +15-20%

Petrol and diesel prices surged in 2022, with petrol reaching over £1.90 per litre in mid-2022. Prices have since fallen to around £1.40-£1.50 per litre in late 2024, but remain around 15-20% higher than in 2021.

Public transport fares have also risen, with rail fares increasing by around 5% annually in 2023 and 2024.

Overall household costs: +20-25%

For a typical household, the cumulative increase in essential costs (food, energy, housing, transport) since 2021 is around 20-25%. For a household spending £2,000 per month on essentials in 2021, the same basket now costs £2,400-£2,500—an extra £400-£500 per month or £5,000-£6,000 per year.

Have incomes kept pace?

For most households, incomes have not kept pace with the cumulative rise in prices:

Wages: up 15-18% since 2021 (but still behind prices)

Average wages have risen by around 15-18% since 2021, according to ONS data. For someone earning £30,000 in 2021, wages are now around £34,500-£35,500.

However, with prices up 20-25%, real incomes (adjusted for inflation) have fallen by around 3-5% for most workers. This means the typical worker can afford 3-5% fewer goods and services than in 2021.

Benefits: up 10-15% since 2021 (well behind prices)

Benefits including Universal Credit, Pension Credit, and disability benefits have been uprated by around 10-15% since 2021, well below the 20-25% rise in prices.

For example, the basic rate of Universal Credit for a single adult over 25 was £324.84 per month in 2021 and is £368.74 per month in 2024-25—a 13.5% increase. With prices up 20-25%, benefit recipients have seen their real incomes fall by 7-12%.

This has pushed hundreds of thousands of households into poverty, particularly families with children and disabled people who rely on benefits.

Pensions: up 20-25% since 2021 (keeping pace with prices)

The State Pension has been protected by the triple lock, which increases pensions by the highest of inflation, wage growth, or 2.5% each year. As a result, the State Pension has risen by around 20-25% since 2021, broadly keeping pace with prices.

The full State Pension was £179.60 per week in 2021 and is £221.20 per week in 2024-25—a 23% increase.

However, pensioners who rely solely on the State Pension (around £11,500 per year) remain on very low incomes, and many struggle with rising costs, particularly energy bills.

Who has been hit hardest?

The cost of living crisis has affected all households, but low-income households have been hit hardest because they spend a higher proportion of their income on essentials:

Low-income households (bottom 20%)

Low-income households spend around 50-60% of their income on essentials (food, energy, housing), compared to 30-40% for middle-income households and 20-30% for high-income households.

This means a 25% rise in essential costs has a much larger impact on low-income households. For a household earning £20,000 per year and spending £12,000 on essentials, a 25% price rise adds £3,000 to annual costs—equivalent to a 15% reduction in disposable income.

Many low-income households have responded by:

• Cutting back on food (buying cheaper brands, skipping meals, reducing portion sizes)
• Rationing energy use (heating fewer rooms, using heating less often, going to bed early to stay warm)
• Falling into debt (using credit cards, overdrafts, or high-cost lenders to cover essentials)
• Using food banks (Trussell Trust distributed over 3 million emergency food parcels in 2023-24, a record high)

Families with children

Families with children face higher costs due to:

• Childcare costs (averaging £1,400 per month for full-time nursery care in many areas)
• Larger food bills (children eat more as they grow)
• School costs (uniforms, trips, equipment)

The Joseph Rowntree Foundation estimates that 4.2 million children in the UK live in absolute poverty (after housing costs)—around 30% of all children. This is the highest level since the 1990s.

Renters

Renters have been hit particularly hard because:

• Rents have risen faster than wages (up 20% since 2021 vs wage growth of 15-18%)
• Renters spend a higher proportion of income on housing (often 30-40% compared to 15-20% for mortgage holders)
• Renters have less financial resilience (lower savings, less access to credit)

Around 1.5 million private renters in the UK spend more than 50% of their income on rent, leaving little for other essentials.

Disabled people and carers

Disabled people and carers face higher costs due to:

• Higher energy use (medical equipment, need for warmer homes)
• Specialist diets or equipment
• Reduced ability to work (limiting income)

Charities report that many disabled people have been forced to ration energy use, risking their health, or have fallen into debt to cover essential costs.

What help is available?

Government support has been scaled back significantly since the peak of the crisis in 2022-2023, but some help remains available:

1. Benefits (Universal Credit, Pension Credit, etc.)

Check if you are eligible for benefits using the government's benefits calculator at gov.uk/benefits-calculators. Around £15 billion of benefits go unclaimed each year, particularly Pension Credit (around 800,000 eligible pensioners don't claim it).

2. Council Tax Reduction

Low-income households can apply for Council Tax Reduction, which can reduce bills by up to 100%. Check eligibility on your local council website.

3. Warm Home Discount

The Warm Home Discount provides £150 off energy bills for eligible low-income households. It is paid automatically to some households (those on Pension Credit) and by application for others. Check eligibility at gov.uk/the-warm-home-discount-scheme.

4. Household Support Fund

Many local councils operate a Household Support Fund, providing grants for essentials like food, energy, and clothing. Check your local council website for details.

5. Food banks

If you are struggling to afford food, contact your local food bank. The Trussell Trust operates over 1,300 food banks across the UK—find your nearest at trusselltrust.org. Many areas also have independent food banks.

6. Debt advice

If you are struggling with debt, seek free advice from:

• StepChange (stepchange.org)
• Citizens Advice (citizensadvice.org.uk)
• National Debtline (nationaldebtline.org)

These services can help you negotiate with creditors, set up affordable repayment plans, or access debt relief schemes.

7. Energy grants and schemes

If you are struggling with energy bills, contact your energy supplier to ask about:

• Payment plans (spreading costs over the year)
• Hardship funds (grants for customers in financial difficulty)
• Priority Services Register (extra support for vulnerable customers)

Is the worst over?

For some households, the worst of the cost of living crisis is over. Real wages are growing again, inflation has fallen, and interest rates are being cut, which will reduce mortgage costs over time.

However, for low-income households, renters, and those on benefits, the crisis continues. Prices remain 20-25% higher than in 2021, incomes have not kept pace, and government support has been scaled back. Charities warn that without further action, poverty and hardship will remain at elevated levels for years to come.

The key risks for 2025 are:

• Energy prices rising again if geopolitical tensions escalate
• Rents continuing to rise faster than wages due to housing shortages
• Unemployment rising as the economy weakens, pushing more households into financial difficulty
• Benefits falling further behind prices if uprating does not match inflation

The bottom line

Inflation fell to 2.6% in November 2024, but essential costs remain 20-30% higher than in 2021, with food prices up 27%, energy bills up 42%, and rents up 20%. Around 7.2 million people in the UK live in absolute poverty (after housing costs), including 4.2 million children. Real household incomes are growing again but remain 3-4% below pre-pandemic trends. Low-income households spend a higher proportion of income on essentials and have been hit hardest by price rises.

Government support has been scaled back, but help is available through benefits, Council Tax Reduction, Warm Home Discount, Household Support Fund, food banks, and free debt advice. For many households, particularly those on low incomes or benefits, the cost of living crisis is far from over, and proactive management of finances and accessing available support is essential to navigate the ongoing challenges of 2025.