The UK's economic crisis explained in seven charts

The UK's economic crisis explained in seven charts

The UK economy is facing a number of powerful headwinds.

The country is still recovering from the shock of the COVID lockdowns, and the economic fallout of Russia's invasion of Ukraine continues to bite.

Households are struggling to manage surging energy and food prices, along with increasing rents and mortgages.

All of this is having a noticeable impact on people's everyday lives. More than 90% of the population have noticed their cost of living increase, according to the Office for National Statistics (ONS), with rising numbers finding it difficult to pay the bills.

Yahoo News UK breaks down how the UK is performing in seven charts:

Inflation is soaring

Inflation – the rate at which the price of goods and services is increasing – is at the highest levels seen for decades in the UK.

In the year to December 2022, consumer price index inflation hit 10.5%, meaning something that would have cost £100 a year ago costs £110.05 today. This is down slightly from from 10.7% a month before.

Interest rates are on the rise

In a bid to bring down soaring inflation, the Bank of England has raised the base rate of interest to 3.5% after years of rates below 1%.

This means the interest paid on debts, such as mortgages and loans, is going up. Interest paid on savings is also increasing.

The economy has started to shrink

The UK economy shrank by 0.3% in the third quarter (July to September) of 2022.

In November the Office for Budget Responsibility (OBR) confirmed that the UK is already in recession.

UK growth compared to other nations

Many issues facing the UK, such as soaring gas prices, are global problems affecting other countries too.

However the UK is faring particularly badly compared to other rich countries: it is the only G7 nation where the economy is smaller than it was before the COVID pandemic.

The country gets a pay cut

The impact of a struggling economy is felt in people's pockets. While prices have risen steeply, pay has not kept up.

When adjusted for inflation, average pay fell by 2.4% in the year to November, denting the spending power of workers.

What about unemployment?

The figures for unemployment are more positive. Currently 3.7% of the working-age population is unemployed, a low level by historic standards.

However the rate has increased slightly in the most recent quarter, driven by those aged 16 to 24.

The OBR predicts the level will rise to 4.9% next year as the economy battles a recession.

The one that really matters

In its analysis of the UK economy to coincide with Jeremy Hunt's autumn statement, the OBR made a stark assessment of how the country's problems will hit ordinary people.

Living standards are set to decline by the biggest margin ever recorded next year, with disposable household incomes dropping by 4.3%.

The decline will drag living standards back down to 2013/14 levels, and will not recover for another six years.