# The Cost of Living Crisis: What Caused It and Where We Are Now

> The cost of living crisis affected millions of households across the UK and beyond. Here is what drove it and what has — and has not — changed.

*Section: News — By Marcus Vale (Business & Markets Editor) — Published November 22, 2025 — 1 min read*

Canonical URL: https://dailyjunction.org/news/what-is-the-cost-of-living-crisis
Tags: cost of living, inflation, energy prices, uk economy, household finances

## Key takeaways

- The primary driver was energy price inflation following Russia's invasion of Ukraine
- UK inflation peaked at over 11% in October 2022 — a 40-year high
- Falling wages in real terms represented the largest sustained decline in living standards for a generation
- Food bank usage doubled between 2019 and 2024

## 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.

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## Sources

- [Reuters](https://www.reuters.com)
- [Associated Press](https://apnews.com)

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