Food prices could soar by 10% and hit UK households harder than COVID lockdowns

The cost-of-living crisis could hit households harder than COVID lockdowns, experts have said, in a stark warning that lays bare the scale of the potential economic hit facing millions of households.

Rising inflation, soaring energy bills and tax hikes threatens to have such an impact that many families, particularly those on low incomes, may feel worse off than they did during the pandemic until at least the middle of this decade.

The situation has been exacerbated by the growing crisis in the Ukraine, which could yet further destabilise the global economy.

It comes amid warnings that food inflation could increase to more than 10% for some households on low incomes.

Managing director of supermarket Iceland, Richard Walker, said that food inflation could hit those "on the breadline" hardest.

“Something as simple as milk has already had exceptional price rises... fortified milk was a quid just over a year ago, [it] is now £1.25," he said on Tuesday. "So when we talk about 5% inflation - like the CPI [consumer price index] said, or 8%, like this report says - actually, I think for food, it’s going to be at least 10%.

"And actually, for those on the breadline, for those on a budget, it’ll be even more."

Inflation is currently at its highest rate in 30 years, with the Resolution Foundation warning price rises could peak at 8.4%.

Watch: How does inflation affect interest rates?

Read more: This simple chart shows why 5.6 million families will be hundreds of pounds worse off this year

Resolution Foundation chief executive, Torsten Bell, said many could be worse off than they were during the pandemic when millions were hit by job losses as COVID plunged the UK into lockdown in March 2020 and forced large parts of the economy to shut down.

"Even when you get to the middle of the 2020s, we still won’t be as well off as you were during the pandemic," said Bell.

"That’s how big what is going on - we’ll be pulling our way back to where we were when it was when the actual lockdowns were going on, in particular for poor households... because they had a big increase in benefits disappearing."

Adam Corlett, principal economist at the Resolution Foundation, has warned that the war in Ukraine will have a significant impact on the cost-of-living crisis.

“Britain has stepped out of a global pandemic and straight into a cost-of-living crisis," he said. “The tragic conflict in Ukraine is likely to further drive up the price of energy and other goods, and worsen the squeeze on incomes that families across Britain are facing.

"Inflation may even exceed the peak seen during the early 1990s, and household incomes are set for falls not seen outside of recessions."

He added: "Working-age benefits and the state pension are due to be uprated by just 3.1% next month, at a time when inflation could be as high as 8%.

“The immediate priority should be for the chancellor to revisit benefits uprating in his upcoming spring statement.”

Last week, foreign secretary Liz Truss said Brits would face "economic hardship" as a result of growing tensions and sanctions with Russia.

"The UK and our allies will have to undergo some economic hardship as a result of our sanctions," Truss told MPs.

Read more: UK 'on edge of economic collapse' over Russian sanctions, warns Tory MP

"But our hardships are nothing compared to those injured by the people of Ukraine."

Charities are joining calls for more government support to get people through the crisis, particularly those 5.6 million Brits reliant on Universal Credit, which is set to increase by just 3.1% in April - significantly below inflation.

Imran Hussain, director of policy and campaigns at Action for Children, said: “The government needs a clear plan to reduce child poverty and it should start by increasing benefits, particularly the child element of Universal Credit.”

A government spokesperson said: “We recognise the pressures people are facing with the cost of living, which is why we’re providing support worth around £20 billion this financial year and next to help.

"This includes putting an average of £1,000 more per year into the pockets of working families via changes to Universal Credit, freezing fuel duties to keep costs down and helping households with their energy bills through our £9.1 billion Energy Bills Rebate.

“We have also boosted the minimum wage by more than £1,000 a year for full-time workers and our £500 million Household Support Fund is helping the most vulnerable with essential costs.”

Watch: Ukraine war: Cost of living squeeze set to intensify as conflict adds to energy price spiral