The price of commodities in the UK has been rising steadily since 2021. According to BBC, on Wednesday, 17th August, food price inflation hit 10.1%, the highest rate of since March 2009. Russia’s invasion of Ukraine is the biggest driver of the high cost of living around the world. Sanctions in Russia have led to the increase in prices of food, fertilizer, and fuel.
The war has also caused a rise in energy costs since Russia is one of the biggest producers of oil. Shutdowns caused by the Covid-19 pandemic, especially in China have also contributed to the high cost of living.
With all these drivers of inflation, everyone wants to know, will the cost of living go down UK? Let’s jump into it right away.
Will Inflation Continue to Rise in the UK?
According to the Bank of England, the rate of inflation is expected to continue rising this year. However, the rate of inflation is expected to slow down next year. It is because the drivers of inflation are not expected to last. Although the cost of living is expected to go down next year, the prices of some commodities will remain to be relatively high.
When will the Cost of Living Go Down UK?
Researchers have suggested that the cost of living is going to remain high as long as the supply chain continues to be a challenge. The war between Russia and Ukraine has been the biggest contribution to the high cost of living. And since it is unpredictable when the war will end, it also very difficult to tell when the cost of living will go down.
Read also: How to hedge against inflation.
Why is the Cost of Living So High?
Inflation started in 2021 due to supply-chain shortages across the world. Other causes of the high cost of living include:
- Restrictions placed by governments to control the spread of Covid-19 leading to the high cost of goods and services.
- Russia’s invasion of Ukraine leading to sanctions on Russia.
- Businesses are charging more for products and services due to the high cost of production.
How Can the Government Lower the Cost of Living?
There are several measures the government can take to lower the cost of living for low-income households. These measures include:
- Giving subsidies. One of the ways how to lower the cost of living in a country is by offering subsidies on products and services. It makes it easy for low income households to access essential goods and services.
- Income tax credits. By offering income tax credits, low-income households will have more money to spend on basic needs like food and housing.
- Mortgage interest deduction. Housing is one of the most expensive household expenses. The government can encourage homeownership through a refundable tax credit to homeowners.
- Lower taxes on essential products. The government can lower taxes on essential products and services so that they are accessible to low-income households.
How to Lower Your Cost of Living in the UK
Besides the government, you too can take measures to reduce your cost of living. Some of the ways you can lower your cost of living include:
1. Tracking your Spending
You need to set a budget and track your spending to ensure that you don’t spend on unnecessary items. Work out your cash inflows and cash outflows to plan your finances well.
Read more: How rich people spend their money.
2. Move to a cheaper city.
You may need to consider moving to a city where housing costs and travel costs are relatively cheaper. This will help you save on some expenses and lower your cost of living.
3. Downgrade Your Car
Downgrading your car can help you save on fuel costs. With the high increases in fuel prices, getting a car with a smaller engine will save you lots of expenses, thereby lowering your cost of living.
4. Get a Roommate
If you don’t have a family, you can get a roommate and share housing costs. Sharing a room can lower your housing expense by almost 50%. Alternatively, you can move to a smaller house.
Read also: How to lower college expenses as a student.
5. Lower your Energy Usage
You may need to get a thermostat to help you lower energy usage. Whenever you are not in the house, you can switch off heating or cooling appliances. Also, you can consider buying energy-efficient appliances.
6. Haggle Where You Can
If you have services that you don’t really need, you can consider dropping them. For instance, if you have pay-TV services, you can terminate them and lower your cost of living.
Summary: Will Cost of Living Go Down UK?
With the high inflation, there is a need for the government and households to find ways to lower the cost of living. The cost of living is expected to go down in 2023, but the prices of some commodities may remain to be high. The above are some measures both the government and households can take to lower the cost of living.