British families are nearly £3,000 worse off after five years of soaring prices, new research has revealed.
The cost-of-living crisis has hit households so hard that the UK has experienced 13 years’ worth of normal price rises in just five years.
The average household would be £2,900 better off today if prices had risen at their usual pace, a new study by the Resolution Foundation found.
The think tank said the pandemic and conflicts in Ukraine and the Middle East have driven up living costs, with energy bills putting the biggest strain on household finances.
James Smith, chief economist at the Resolution Foundation, said: “While the hit to incomes from rising prices has been felt right across the board, the hardship has not been equally shared.”
He added: “It is poorer families who have cut back hardest on heating and are falling behind fastest on essential bills, and the conflict in the Middle East is set to keep energy prices high.”
The research found that an additional 1.7 million households were unable to keep their homes warm enough in 2022/23 compared with the previous year, as families struggled with rising energy bills.
Lower-income households have been hit particularly hard, with growing numbers struggling to keep up with essential payments.
The proportion of poorer households falling behind on bills such as energy, water, council tax and rent has almost doubled since 2020.
By March 2026, nearly one in five lower-income households (18 per cent) were behind on at least one of these essential payments.
The study lands as Chancellor John Healey prepares for his first Budget. He faces mounting calls to deliver further cost-of-living support, following Andy Burnham’s pledge to offer families “breathing space.”
What does the cost of living crisis mean for you? | GETTY
Yet Mr Healey’s room for manoeuvre is severely constrained. The Iran war and a global bond sell-off have pushed up government borrowing costs, tightening the fiscal position considerably.
Mr Smith warned that assistance was most needed “just when the public finances leave less room than ever to provide it.”
He urged the Government not to repeat the approach taken under Liz Truss, when expensive universal support was rolled out in 2022.
“The Government can’t borrow its way out of this, and repeating the expensive blanket support of 2022 isn’t an option,” he said.
Higher bills have contributed to household energy debt climbing to almost £7billion | PA
“Any new help must be squarely targeted at the poorer families facing the greatest hardship starting with their energy bills.”
Households could also face higher prices in shops as retailers struggle with rising electricity bills.
New figures from the British Retail Consortium (BRC) show retailers are expected to pay an extra £440million for electricity this year, despite using almost the same amount of energy.
The industry’s electricity bill is set to rise by 16 per cent, from £2.72billion in 2025 to £3.16billion in 2026.
Much of the increase comes from government levies and charges for maintaining the electricity network, which now make up around two-thirds of retailers’ bills.
The BRC warned that shops could be forced to pass these extra costs on to customers through higher prices. Helen Dickinson, chief executive of the BRC, said: “Retailers’ energy bills continue to push up the price of everyday essentials for shoppers everywhere.”
She called on the Chancellor to reduce government levies and make network charges more predictable.
Retailers are already facing £6.5billion in extra employment costs over two years, adding further pressure on businesses.
Meanwhile, Green MP Hannah Spencer warned that predicted household energy bill increases in January could be “the final straw for too many people.”
She called for energy costs to be taken off bills, more investment in home insulation and action to tackle excessive profits made by energy companies.