ONS: Nearly all Brits pinched by cost of living squeeze

Almost all Brits are feeling the pinch of the cost of living squeeze, causing them to cut back on spending, reveals official figures released today.

Over eight in 10 households have noticed an uptick in their cost of living, up five percentage points over the last week, according to the Office for National Statistics (ONS).

Households are bracing for a once-in-a-generation erosion in their living standards this year, driven by inflation climbing to levels not seen in decades.

Economists are forecasting real household disposable income to fall in the region of two per cent if inflation hits the Bank of England’s expected 7.25 per cent peak in April.

That would be the steepest reduction in spending power since the late 1940s.

However, the outbreak of war between Russia and Ukraine seems certain to push UK inflation well above the Bank’s forecasted peak.

Goldman Sachs think soaring energy prices triggered by the conflict will lead to the energy price cap rising a further 55 per cent in October, sending the cost of living to 9.5 per cent, the highest rate since 1990.

Economists have revised down their projections for UK economic growth this year due to the reduction in households’ living standards likely sparking a pull back in consumer spending.

JP Morgan this week warned growth could “slow to a crawl”.

Credit and debit card spending dropped five percentage points over the last week to 93 per cent of its pre-pandemic levels. The drop is unlikely to have been driven by consumers staying indoors during last month’s storms.

Retail footfall rose 11 per cent over the last week, the ONS said.