Five charts that explain Britain's high cost of living

When news broke that new UK Prime Minister Andy Burnham would embark on a month-long tour about the "cost of living" across Britain, one Reddit user commented sarcastically: "Housing is too expensive, energy is too expensive, food is too expensive, etc. That's all you need to know, Andy. I've saved you some (very expensive) petrol money."

Like many countries around the world, the UK is grappling with rising living costs. The Bank of England (BoE) forecasts inflation will continue to rise in the second half of the year as fallout from the US-Israel war against Iran pushes up energy prices and household utility bills.

Where does UK inflation stand?

The annual inflation rate in June was 2.8%, down slightly from 3% in May. That means prices are still rising but at a slower pace. Specifically, if an item cost £100 (about $135) in June last year, it now costs £102.80 ($138.65).

Before the US and Israel attacked Iran on February 28, the BoE forecast that inflation, measured by the Consumer Prices Index (CPI), would fall from 3.4% in 2025 to 2.3% in 2026. Instead, inflation stood at 3.4% in March this year, largely driven by higher fuel and heating costs.

Fuel prices up more than 20%

The closure of the Strait of Hormuz – a route carrying about one-fifth of the world's oil and liquefied natural gas (LNG) supply – has pushed up the price of petrol, transport, food and other goods.

Petrol prices in the UK have hit a three-and-a-half-year high. According to RAC Foundation data, petrol and diesel prices rose 22% and 27% respectively between February 25 and August 11. The average price of a litre of petrol rose from £1.32 ($1.78) to £1.61 ($2.17), while diesel rose from £1.42 ($1.92) to £1.81 ($2.44) per litre.

Who is hit hardest?

Not all households experience inflation the same way. On average, a UK household spends about £677 ($914) per week on goods and services, with the biggest outlays being housing, fuel, electricity, transport, food and entertainment.

The impact is far greater for low-income households. The Office for National Statistics (ONS) says the poorest 20% of households spend an average of £407 ($549) per week, while the richest 20% spend £1,084 ($1,462). Proportionally, poorer households feel price increases more keenly because they devote a larger share of income to rent, energy, food and transport, leaving less of a "cushion" to absorb price shocks.

According to the Joseph Rowntree Foundation, a charity focused on poverty research in the UK, the cost-of-living crisis is spreading, with 7.4 million low-income families unable to afford essential items this year – the highest level since the organisation began tracking in 2021.

Is the UK worse off than other Western nations?

June's inflation rate of 2.8% puts the UK in the middle of the developed industrial economies of the G7. The US has the highest inflation at 3.5%; followed by Italy (3%), Canada (2.8%), the UK (2.8%), Germany (2.3%), France (1.8%) and Japan (1.7%).

Countries are affected differently by energy prices, wage pressures and government policy. For the UK, inflation is mainly driven by rising energy costs due to the Middle East conflict; services inflation stood at 3.6% in June, pushed up by restaurant and hotel costs; and wage growth has slowed.

Wages barely keeping up with prices

Weekly grocery prices in the UK remain more expensive than a year ago, but the latest figures show food price inflation has slowed. This does not mean prices are falling, just that they are rising more slowly.

According to the ONS, food and non-alcoholic drink prices rose 1.7% year-on-year in June, down from 2.2% in May. Pressure may mount as the BoE says food prices will be affected by higher energy costs in production and transport. The BoE forecasts food inflation will rise to nearly 3.5% by December while supermarkets say they expect increases of 4-5% by the end of the year.

Real weekly earnings, or wages adjusted for inflation, have also declined in recent months, from around 0.4% at the start of the year to 0.1% after the Iran war began – making it harder for people to cover rising costs.