The war in Ukraine will push up energy prices and put even more pressure on British families, a think tank has warned.
The Resolution Foundation predicts that a typical household’s income will fall by around £1,000 this year once the impact of inflation is factored in.
That would be the largest real income drop since the mid-1970s, she added.
A government spokesman said he recognized the pressure budgets were facing.
Many families were already anticipating their monthly expenses to increase as April’s energy price cap and Social Security contributions soared.
But in a new report, the Resolution Foundation said the Ukraine conflict would push up the cost of living even further, as prices for fuel and other commodities would skyrocket.
She expects inflation, which measures how the cost of living changes over time, to peak at 8.3% in April. That’s much higher than the Bank of England’s forecast of 7.25% in February.
- Five ways the Ukraine war could push up prices
- Charities warn that fuel poverty could double in a year
- Gasoline at new record as oil and gas prices soar
“The crisis in Ukraine has increased both the magnitude of price hikes and the level of uncertainty about their magnitude and duration,” the foundation’s report said.
“Britain’s post-Covid economic recovery is well underway, but a profound decline in living standards is just getting underway,” it added, also warning that wages are not expected to rise particularly quickly either.
This spring was always a critical moment.
In early April, last year’s spikes in global oil and gas prices are beginning to affect our energy bills and the energy price ceiling is skyrocketing. You should by now have received a message from your provider explaining what will happen to your particular bill and warning you about an increase in your direct debit.
That will be hard enough for many households, but we are now also seeing record prices at gas stations because of the war in Ukraine. The Resolution Foundation also warns that the conflict will bring further price hikes, with inflation rising at the same point as the price cap rises.
The only saving grace is the season. At least when the weather gets better (and that’s a big “if”) we can start using less energy and leaving the car at home will be easier for many. That could help people divert cash to cover the rising in-store prices we have to pay every time of the year.
Its chief economist Adam Cortlett said rising bills would hit low- and middle-income families hardest.
He also suggested that poorer households would face a “roller coaster ride of living standards” because of the way benefit payments are set months in advance.
For example, most working-age benefits and the state pension are set to rise 3.1% in April – a time when the cost of living could rise as much as 8%. But high inflation in 2022 should result in higher payments next year.
The think tank called on Chancellor Rishi Sunak to announce new support for struggling families in his spring statement.
Torsten Bell, Executive Chairman of the Resolution Foundation, said: “Although the economic consequences of the war will feel trivial compared to the suffering of millions of Ukrainians, they will nonetheless have a significant impact on Britain.”
He suggested that rising gas and oil prices would exacerbate the “cost of living crisis” and cause “painful pressure on family incomes”.
A Government spokesman said: “We recognize the pressures people are facing with the cost of living which is why we are providing around £20billion worth of support this financial year and beyond.”
They said this includes freezing fuel tariffs to keep costs down, as well as introducing a rebate program for energy bills.
“We have also increased the minimum wage for full-time workers by more than £1,000 a year and our £500m budget support fund is helping the most vulnerable with essential costs,” they added.
Add Comment