3 charts that explain the UK's cost of living crisis

The cost of living has been on the increase in the UK since the beginning of 2021.

Inflation soared to 6.2% in February this year, the highest figure since 1992, meaning goods and services are becoming less affordable for British households.

At the same time, wage increases are failing to keep pace with rising prices, and incoming tax rises in April are set to squeeze budgets even further.

In additional to the humanitarian cost, Russia's invasion of Ukraine is also having a deep impact on the global economy.

International oil and gas prices have risen steeply since the war began, driving up energy prices and causing the cost of living crisis to bite harder.

In short, British people's money isn't going as far. Yahoo News UK looks at three of the key factors why:

Inflation is soaring

Inflation refers to the average change to the typical price of all goods and services over 12 months.

According to the latest figures from the Office for National Statistics, prices rose by 6.2% in the year to February 2022.

The steep increase is largely driven by soaring energy bills and more expensive food, the ONS said.

The Bank of England (BoE) aims to keep inflation between 1% and 3%, meaning current levels are considerably above target.

The latest BoE forecasts predict that inflation will peak at 7.25% in April 2022 before it starts to come down again. However, some economists and think tanks predict even steeper price rises, as high as 10%, largely caused by spiralling energy bills.

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Energy and fuel bills

Soaring household energy bills, driven by a spike in the wholesale price of gas, have been a key factor behind inflation levels in the UK.

According to the BoE, half of the increase to inflation in 2021 was caused by the cost of energy.

Increased demand for energy following lockdowns, an unexpected shortage of supply, unusual weather, and the conflict in Ukraine are among the reasons driving up global gas costs, according to the International Energy Agency, with consumers already feeling the pinch.

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But it's about to get much worse. In February, regulator Ofgem announced that the energy price cap, which limits how much suppliers can charge per unit of gas or electricity, would increase by 54% on 1 April.

As a result, the typical annual household energy bill will rise from £1,277 to £1,971.

The change will will affect roughly 22 million customers who are on variable tariffs covered by the cap.

Despite already seeing huge increases to their monthly outgoings, consumers have been shielded from the worst of the energy crisis by the price cap, which is reviewed twice a year.

However, analysts predict an even steeper price hike later this year, with annual average bills soaring to £3,000.

Consumers are being further hit by more expensive petrol and diesel.

Prices at the pump increased throughout 2021, and leapt after Russia invaded Ukraine in February.

According to the latest figures from the department for Business, Energy and Industrial Strategy (BEIS), on 14 March petrol reached a record high of 160p per litre and diesel reached a record high of 169.5p per litre.

Incomes failing to keep up

Wages are rising slower than inflation, resulting in a real-terms decline in people's incomes.

Average earnings excluding bonuses saw strong growth in 2021, rising to 7.3% in the year to June 2021. However, this was largely driven by a recovery from the steep dip caused by workers being put on furlough during the first coronavirus lockdown in March 2020.

Since then the rate has stabilised, but failed to keep up with inflation. In January 2022, wage growth was 3.8%, while inflation was 5.5%.

For families relying on benefits, the gap is even wider.

In February, MPs voted through the annual pensions and benefits uprating order, confirming a 3.1% increase to benefit and tax credit rates, including Universal Credit, from April 2022.

The increase is linked to inflation in order to reflect changes to people's outgoings. However, the rate approved by the government is based on inflation data from September 2021.

Since then, inflation has rocketed, and is forecast to be as high as 8% in April.

This is far higher than the increase to universal credit, meaning the 5.6 million households in the UK relying on the benefit will see a significant real-terms cut to their income.

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