Cost of living crisis set to intensify again as bills mount despite surprise fall in inflation
The rate of inflation may have eased slightly but it is clear that UK households are facing a surge of rising costs ahead.
At an annual rate of 2.5%, the consumer prices index (CPI) measure of inflation for the 12 months to December is well below the energy-led cost of living crisis peak above 11%.
While that is obviously a relief, prices are still generally rising – just not as quickly.
Money latest: Reaction to inflation data amid warnings of rises ahead
Some rising bills ahead that we know of will be inflationary while others could be – it’s just too early to know given uncertainty hanging over the prospects for fresh Bank of England interest rate cuts and the effects of budget tax measures on employers from April.
Market jitters over the impact of Donald Trump’s return to the White House, which in turn have intensified scrutiny and pressure on the UK’s public finances, add to a complicated picture for the price outlook.
So where are the upwards pressures on costs in the UK all coming from? Here are 10 areas where they are likely, if not certain.
Everywhere?
It’s an unashamedly broad brush but it’s important to recognise the fact that business lobby groups have widely warned of a price punishment since the budget, which put firms on the hook for £25bn of tax rises announced by chancellor Rachel Reeves.
It means that from April, when measures such as higher employer national insurance contributions take effect, any business facing a higher tax bill could potentially pile that additional cost on to their customers.
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What’s the outlook for grocery costs?
In shops
When it comes to the subject of passing on budget tax hikes, retailers have been the most explicit about it.
That is because the likes of supermarket chains are among the country’s biggest employers, with Tesco alone expecting a £250m hit per year over four years, amounting to £1bn.
The British Retail Consortium has warned of food prices going up, rising by an annual rate of 4.2% by the year’s end, while two-thirds of top bosses across the retail industry as a whole are planning to raise prices.
At banks and lenders
Even after today’s inflation data, financial markets are still only pricing in two interest rate cuts over the year to date mainly because inflation is forecast to rise in the months ahead.
Analysis by Pantheon Macroeconomics on Wednesday forecast a figure of 3.2% in April.
Higher borrowing costs to help keep a lid on inflation mean elevated mortgage rates, in a year that is expected to see millions of households seek a new fixed deal.
There is also a risk the recent market turmoil, that has seen UK government long-term borrowing costs jump to levels not seen since 1998, pushes mortgage costs even higher.
Any rises in so-called swap rates, which determine the cost of financing home loans for banks, are typically passed on to the borrower.
On imports
A weaker pound – as recently witnessed during the market troubles – makes the cost of importing goods more expensive.
Sterling is currently 12 cents down on where it stood against the dollar at the end of September while it is more than two cents down on the euro.
The divergence in the falls tells you that the bulk of the pound’s problems are more tied to dollar strength than pound weakness.
It can be explained by the fact that investors are worried about the impact of universal trade tariffs threatened by Mr Trump pushing up domestic inflation in the US.
Fuel bills
The pressure on the pound as part of the aforementioned market event means that a double whammy for fuel bills is imminent.
A weaker pound, coupled with a rise in global oil costs which are priced in dollars, means that drivers are facing the prospect of further increases at the pumps beyond the 3p-a-litre seen since Christmas.
Brent crude oil is currently standing at $80 a barrel – up from $71 just a month ago.
Energy
Energy bills have been on the rise since October when a 10% increase in the energy price cap took effect.
While typical bills were up by a further 1% in January, further increases in wholesale prices in recent months are expected to be reflected in the cap from April.
The most recent forecast by industry experts Cornwall Insight saw a 3% hike from April to an average £1,785, though recent cold snaps across Europe, coupled with weak storage levels, have pushed up natural gas contracts since.
Benchmark British gas prices rose by 20% during the second half of December as colder weather led to higher demand across Europe. Weaker inventories will also mean that storage has to be replenished at a higher cost than seen after the previous, mild winter.
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Why your energy bills look set to rise
Water
It was announced just before Christmas that the average annual water bill across England and Wales was to rise by 36% over the next five years.
Just how much depends on where you live as the hikes vary by supplier. Southern Water customers face the heftiest increases from April through a 53% increase to £642 by 2030.
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Water bills ‘an absolute disgrace’
Council tax
Local authorities in England will be able to raise core council tax by up to 3% and the adult social care element by 2% in the coming financial year.
No final decisions have been taken across local authorities in Wales. In Scotland, where the bill includes water rates, rises of up to 10% are being considered by some councils after many years of frozen bills.
Mobile phones and broadband
Most customers are on plans which have links to December’s inflation rate.
Analysis by price comparison service uSwitch showed that mobile users faced average increases of £15.90 a year from April while broadband bills would go up by a typical £21.99.
It’s worth noting, at this point, that the communications regulator has banned contracts linked to the rate of inflation in favour of a set price increase to bolster transparency.
This applied to new contracts from January.
What about my ability to absorb price rises?
The good news here is that the pace of average wage growth has outstripped inflation since August 2023.
The trouble is, that has done little to make households feel better off in what is an evolving cost of living crisis.
Singer Linda Nolan, who rose to fame alongside her sisters in The Nolans, has died after several years of battling cancer.
The Irish star, 65, and her sisters Coleen, Maureen, Bernie, Denise and Anne, had a run of hits in the late 1970s and ’80s – including the disco classic I’m In The Mood For Dancing.
Paying tribute on The Nolans‘ X account, her sisters described her as “a pop icon and beacon of hope”, who “faced incurable cancer with courage, grace and determination, inspiring millions”.
Linda died peacefully in hospital this morning, “embraced with love and comfort” with her siblings by her side, her agent Dermot McNamara said in a statement.
“As a member of The Nolans, one of the most successful girl groups of all time, Linda achieved global success; becoming the first Irish act to sell over a million records worldwide, touring the world and selling over 30 million records,” he said.
“Her distinctive voice and magnetic stage presence brought joy to fans around the world, securing her place as an icon of British and Irish entertainment.”
As well as her TV and musical career, Linda helped to raise more than £20 million for numerous charities, including Breast Cancer Now, Irish Cancer Society, Samaritans and others.
“Her selflessness and tireless commitment to making a difference in the lives of others will forever be a cornerstone of her legacy,” Mr McNamara said.
Five of the Nolans in 1983 (L-R): Linda, Anne, Bernie, Coleen and Maureen. Pic: PA
Linda’s death came after she was admitted to hospital with pneumonia over the weekend. She began receiving end-of-life care after slipping into a coma on Tuesday.
Details of a celebration of the star’s “remarkable life” will be shared in due course.
Linda was born to Tommy and Maureen Nolan in Dublin on 23 February 1959, the sixth of eight children.
Her parents were both singers and keen to turn their young family into a musical troupe. Linda made her stage debut aged just four.
Those early years put the siblings on track for a career in show business which lasted for decades. As well as I’m In The Mood For Dancing, The Nolans had hits with Gotta Pull Myself Together, Attention To Me and Don’t Make Waves, and they also had their own TV specials.
At their height, they toured with Frank Sinatra and were reported to have outsold The Beatles in Japan.
Linda left the group in 1983, but later reformed with her sisters for several comeback performances. She also became known for musical theatre, most notably performing the role of Mrs Johnstone in Blood Brothers for three years from 2000.
L-R: Bernie, Denise, Linda (top), Anne and Maureen Nolan pictured in 1975, before youngest sister Coleen joined the group
Four siblings struck by cancer
Linda was first diagnosed with breast cancer in 2005, and underwent a mastectomy two days before her 47th birthday.
After being given the all-clear in 2011, in 2017 she was diagnosed with secondary breast cancer. Three years later, Linda and Anne together revealed they were being treated for cancer once again.
The sisters were diagnosed with different forms of the disease just days apart after they returned home from filming a series of their show, The Nolans Go Cruising. Linda had cancer of the liver, while Anne had breast cancer.
The star, pictured last year, had battled cancer for several years. Pic: Shutterstock
They went on to write Stronger Together, an account of their journey that included frank details of their treatments and the side effects.
But in 2023, Linda revealed the cancer had spread to her brain and she was beginning treatment as part of a new drug trial.
The Nolans lost their second-youngest sister, Bernie, to cancer in 2013, aged 52.
Loose Women star Coleen Nolan also revealed she was diagnosed with skin cancer last year, and said she was using a chemotherapy cream to remove it.
Linda’s husband of 26 years, Brian Hudson, died in 2007 after being diagnosed with skin cancer.
Anne Nolan is now cancer-free.
Tributes to star ‘who was always a joy’
TV star and singer Cheryl Baker and comedian Tommy Cannon are among those who have paid tribute.
“I’m heartbroken to hear about the passing of Linda Nolan,” Cannon wrote on X. “I had the pleasure of working with her on so many occasions, and she was always a joy – full of warmth and love. My thoughts and love are with the Nolan girls and the whole family.”
“The most incredible voice, the wickedest sense of humour, such a massive talent,” Baker wrote. “You’re with Brian now, Lin.”
Loose Women also sent its love to her family. Linda appeared as a guest panellist on the ITV chat show over the years, alongside her sister Coleen.
The Blackpool Grand Theatre described her as “a true Blackpool icon”.
A 20-year-old trainee gas engineer who won £7.5m says he was back working on blocked drains the day after claiming his cash.
James Clarkson, 20, from Carlisle, Cumbria, found out he’d hit the £7,533,329 National Lottery jackpot on 4 January – but said he has no plans to quit his job.
“I was out in the cold fixing blocked drains the day after I found out I had won,” he said.
“It was a bit grim but that’s reality.
“I’m not going to stop working, I’m too young,” he added, admitting he knew it might sound “mad” to some.
“I want to qualify as a heating engineer and then go from there.
“I need to have a purpose in life, plus dad wouldn’t let me not work anyway. He says there are plenty of millionaires out there that still work and you need a reason to get up each day.”
Mr Clarkson celebrating with his family. Pic: PA
Mr Clarkson added he still planned to have “some nice holidays” in between working, and revealed one of his first purchases was an all-inclusive luxury break to Cape Verde, along with a few designer items including a Gucci bag for his girlfriend and two new jackets for himself.
He said he also planned to splash out on a new car, possibly an Audi – but for now, he’s got his work van.
“If you drive a cold work van all day, going from job to job, you’d understand,” he said.
“The comfort, the steering, the heated seats. I realise how jammy that sounds, not many people my age can afford the car insurance let alone a car like that to drive.”
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As a huge Manchester City fan, he said he was also looking to buy a season ticket at the Etihad Stadium, as well as taking care of his extended family – starting with paying off his parents’ mortgage.
The new multi-millionaire holds up bespoke Manchester City kit celebrating his win. Pic: PA
He said: “I’ve been thinking about it a lot, it’s what I want to do. I told them last night and they seemed really overwhelmed.
“We are close and they have always been there for me. This win isn’t just for me, I want to make sure we all benefit.”
Mr Clarkson played on the National Lottery app, choosing his winning numbers – 16, 19, 22, 24, 27 and 35 – at random.
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