The cost-of-living crisis has made life difficult for everyone, but some have been hit harder than others, especially those living in deprived areas of the UK.
The higher inflation rate has impacted lower income households more, due to a larger amount of their money being spent on essentials, such as energy bills and food. This has left them with far less disposable income, with many turning to options such as a loan.
Andrew Bailey, governor of the Bank of England, said high inflation was bad for the less well-off in general, but this time, it was particularly damaging. Leaving more of us with serious financial difficulties, the higher prices impacted the “essentials of living”; food and energy, in particular.
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Which regions are hardest hit?
The most deprived areas of England are the places being hardest hit by the economic crisis. The residents are badly affected, because they have less disposable income to fall back on. With no protection against price rises, even with careful budgeting, they don’t have enough money to cover even the essentials.
Research by the Office for National Statistics has found 58% of people in deprived areas are spending less on food and essentials. Even those living in the least deprived areas of the UK are spending less, with 33% saying they have had to cut their food budget. Almost all adults in Britain say their shopping bill has risen significantly, causing issues.
Even though the threat of a recession appears to have abated, according to the Bank of England, England’s poorest areas are still being hard hit by price hikes.
The ONS says the north-east of England is the most deprived area of the UK, with 54.6% of homes fitting the criteria. Liverpool, Manchester, Hull and London also have some of the UK’s most deprived neighbourhoods.
In contrast, south-east England has the fewest deprived households at 48% of the population. Surveys also point out that people in more well-off areas are likely to implement energy efficiency improvements in their home to save money on bills. People in deprived areas don’t have the funds to make any significant changes. With rocketing food prices, they can barely afford the everyday essentials.
While 33% of people in the most affluent regions admitted they had cut down on food shopping due to affordability issues, only 2% said they had fallen behind on their bills. This compares with 10% of residents in deprived areas who are in arrears with utility bills.
The ONS bases its findings on the Deprivation Index, which is a system that classifies areas into five groups, ranging from Britain’s least to most deprived regions. It considers factors such as household income, health and crime.
How high is inflation?
The Consumer Price Index is used by the ONS to calculate inflation, as it tracks the prices of 700 common consumer goods and services. It currently stands at 10.1%, which is below its high of 11.1% in October 2022, but way above the Bank of England goal of 2%. The Bank of England adjusts interest rates to achieve its target.
The biggest drivers of inflation over the past 12 months have been soaring energy bills and fuel prices. Britain has suffered particularly high inflation largely due to its reliance on natural gas.
We currently have the highest inflation rate in Europe, according to Reuters and we are the only European nation where inflation is still in double figures following the peak of the economic crisis in 2022.
Inflation has been gradually coming down since October and the latest forecasts from the Office for Budget Responsibility and the Bank of England anticipate it will fall sharply later this year. They estimate it could fall as low as 4% by the end of 2023.
However, economists suggest businesses that sell goods and services are likely to remain cautious when it comes to reducing prices in line with inflation, as they are still facing high overheads, and many are fighting for their life.
How are people surviving the economic crisis?
Surveys have revealed more people have had to seek community support, such as using food banks. Data from the Trussell Trust shows almost three million emergency food parcels have been distributed by the charity in the past 12 months. This is the most food parcels ever distributed by the network in any 12-month period and is an increase of 37%, compared with the same period the previous year. More than one million parcels were handed out specifically for children in need of food.
Between April 2022 and March 2023, 760,000 people had to use a food bank for the first time. The busiest month on record for the Trust was December 2022, when a food parcel was distributed every eight seconds.
Financial insecurity has led more than 11 million people to seek debt management advice in the past three months alone, with 20% of all UK adults getting independent free money guidance, according to the Money and Pensions Service.
In addition, 25% of adults have spoken to companies, such as energy suppliers or their bank, about extra support. Money problems are more prevalent among young people, with around one-third of 18 to 24-year-olds needing debt advice.
This year, UK credit card borrowing has soared to its highest monthly level since 2004, while economists say workers are facing a “return to 2006 real-term wages” in 2023 in “highly challenging” circumstances. A quarter of all adults say they struggle to keep warm in their house because they can’t afford to put the heating on, while a study by Currys reveals more customers than ever are relying on lending.