Inflation may have declined for the second month in a row, but the cost of living crisis is far from over and the latest data continues to show a North-South divide.
Over the last 18 months, inflation rose by 13.6%, and it’s unlikely that average pay has been able to keep up with this pace. This highlights the importance of supporting the lowest income households and delivering on the levelling up agenda.
Centre for Cities’ research and tracker has analysed how the cost of living crisis is playing out, proposing short term and long term policy solutions to support the people and places affected.
Two key factors driving the cost of living crisis across cities and large towns are: energy consumption and petrol consumption.
Domestic energy costs are linked to the nature and quality of housing stock. Energy inefficient dwellings (i.e. those that fall below EPC band C) tend to be more expensive to run and so are forcing a tighter squeeze on household finances.
Vehicle usage, and by extent spending on petrol, also play into the equation. Households that are more reliant on cars to travel are more vulnerable to soaring fuel prices.
While the national picture is clear, a lot less is known about how the cost of living is playing out in cities and large towns across the UK. Centre for Cities research shows there is a clear geography to the crisis, which is deepening inequalities across Britain and worsening the North-South divide. Cities outside the South are suffering higher rates of inflation and tighter squeezes on household finances.
Centre for Cities’ cost of living tracker maps city-by-city inflation and wage figures to visualise where inflation is hitting hardest and how prices and wages are rising across cities and large towns. Additionally, our energy prices tool shows how average energy bills differ across the country and the respective impact of the Energy Price Guarantee (EPG).
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Our research has shown that many of the cities and towns facing higher inflation rates are in the North, Midlands, and Wales. As of February 2023, Burnley has the highest inflation rate at 11.8%. This is followed by Glasgow and Blackpool both at 11.4%.
At the other end of the spectrum, cities and large towns in the South, particularly in the Greater South East, have been relatively sheltered from rising costs. As of February 2023, places with the lowest inflation include London (9.3%), Cambridge (9.3%) and Reading (9.4%).
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In early September 2022, the Truss Government announced the Energy Price Guarantee (EPG), outlining that typical household energy prices will be capped at £2,500 a year for the next two years.
While this will partially shelter households from soaring energy costs, it will have an uneven impact across the country because households outside the Greater South East are more likely to have energy bills above £2,500 due to differences in energy efficiency.
This follows on from the £15bn support package put forward by the Johnson Government at the end of May 2022.
Given the crisis has worsened, this package is increasingly inadequate, and, as called for by Centre for Cities, should offer more targeted support toward the people and places that need it most.
To tackle the cost of living crisis in the short term, the Government should support people’s immediate spending needs by:
There are also a number of medium to long term policy interventions that would help to mitigate inflationary shocks from happening in the future, such as accelerating the retrofit agenda and encouraging general economic growth to counter soaring costs.
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