What caused it
The cost of living crisis had multiple overlapping causes. The primary driver was energy prices: Russia's invasion of Ukraine in February 2022 disrupted global gas markets and sent energy prices to record levels, with the UK household energy price cap increasing from around £1,200 per year in 2021 to a peak of £2,500 per year with government support in 2022-2023 (and what would have been over £3,500 without the Energy Price Guarantee).
The wider inflation picture
Energy cost inflation fed through into the wider economy: food prices (dependent on energy costs for production, fertiliser and transport) rose sharply; businesses facing higher energy and input costs raised prices; and supply chain disruptions dating from the pandemic persisted. UK CPI inflation peaked at 11.1% in October 2022 — a level not seen since the early 1980s.
The wage picture
Nominal wages grew, but more slowly than inflation for most of 2022-2023 — producing the largest sustained fall in real wages for a generation. Those on fixed incomes — pension recipients before the triple lock increase, benefits claimants whose payments were uprated below inflation — experienced the sharpest falls in living standards.
Where things stand
By 2024-2025, headline inflation had fallen back toward the Bank of England's 2% target. Energy prices had declined from their 2022 peaks. However, the cumulative price level remained significantly higher than in 2021 — inflation returning to 2% means prices rising at a slower rate, not returning to previous levels. Food bank usage, housing affordability and the incidence of energy debt remained elevated compared to pre-2022 levels.