Navigating the Cost of Living Crisis in the UK - Understanding the Key Research Findings

The UK continues to feel the effects of what many say is the most significant cost of living squeeze in a generation. Even though headline inflation has eased from its peak, the lasting impact on households, the populations’ wellbeing, work and society remains significant. Here we look at just some of the latest evidence and analyse what the crisis means for everyday life.

A continuing crisis

UK inflation peaked at 11.1% in late 2022 — the highest in over four decades — and while it has since cooled, the cost of everyday essentials are still far above where they were before the cost of living crisis began. In late 2025, over 60% of UK adults reported increases in their cost of living compared with the previous month, driven mainly by high food and energy costs.

For many households, this simply means that money doesn’t stretch as far as it once did. Even with some short-term relief measures and targeted support, the burden on household budgets and daily living expenses continues.

Everyday hardship: Food, heating and essentials

Recent data from the Joseph Rowntree Foundation (Cost of living | Joseph Rowntree Foundation) shows that hardship remains high, particularly among low-income families, and that to stay financially afloat day-to-day, people are being forced to make some tough choices including sacrificing warmth and comfort at home, food and security.

• More than half of low-income households report cutting back on heating to reduce energy costs.

• Over 5 million families have cut back or skipped meals because they can't afford food.

• Nearly 4 million households have borrowed to pay for basic essentials — and most of these are now in arrears.

• Around 60% of low-income families have gone without essentials in the last six months.

Income, living standards and inequality

Analysis suggests that real incomes have stagnated or fallen for many British households in recent years. Although headline inflation may have eased, cumulative price increases across food, energy, mortgages and housing mean living standards are significantly lower than before the crisis.

Independent researchers and think tanks also highlight rising ‘material deprivation’, which means that more households are unable to afford basics like adequate heating. In practical terms, this means more people are struggling to cope with everyday life — and the shock of setbacks like job changes, illnesses or emergency expenses hits harder than it would have been just a few years ago.

Mental health and wellbeing

The financial squeeze is more than just a stress on wallets — it’s a stress on minds.

Polling data shows that:

• Nearly six in ten UK adults report that the crisis has had a detrimental effect on their mental health, which has led to anxiety, depression or feelings of hopelessness.

• Over 1 in 5 say they’ve felt unable to cope because of rising costs.

• Millions dread opening post from creditors, highlighting ongoing financial anxiety.

Meanwhile workplace research points to a silent productivity crisis, with financial worries distracting workers, driving stress and contributing to absence and disengagement at work.

Work and household finances

The impact on the workforce is unmistakable. Survey data shows:

• Almost nine in ten UK workers say they are negatively affected by cost-of-living pressures.

• Nearly half of employees worry about finances daily.

• Around 45% of staff are limiting heating at home to save money.

This isn’t just a personal or household issue — it has direct consequences for employers too, with financial stress linked to reduced worker energy, lower productivity and higher absence.

Young People and the Future

The cost of living crisis hasn’t hit all age groups equally.

Recent research notes that half of young adults (16-25) say the crisis has affected their lives more than the pandemic, with serious impacts on their mental wellbeing and future career and life prospects. Many young adults report they feel an increased sense of anxiety about money every day, and a significant number say they’ve altered life plans or ambitions because of the current, ongoing financial pressures.

What can change?

Addressing the cost of living crisis requires a multi-faceted approach to solutions — from stronger financial support and more secure incomes to targeted mental health resources and workplace wellbeing programmes. Understanding the real-world impact of these pressures helps inform better policy, workplace support and community action.

The cost of living crisis may have evolved, but it hasn’t gone away — and its effects are likely to continue being felt across lives, homes, and workplaces throughout the UK for some time yet to come.

Who can help?

As workforce reward, pay and engagement solution experts, Magic Connect specialises in working with businesses and mapping them to the best specialist providers. Our internal team and network of professional partners are industry experts in helping businesses provide exceptional workplace benefits and wellbeing support, especially to help with financial wellbeing and understanding, and emergency mental health support.

Find out more about our services here, and our workplace benefits and wellbeing app Work Wiz here.

Sources: Unum UK, PWC, USwitch, NatWest. More about Magic Connect Magic Connect are strategic workforce solutions consultants. We help organisations solve workforce challenges by matching them with the most suitable partners, based on operational needs, compliance demands, and long-term outcomes.

As an independent consultancy, we draw from a network of specialist partners, each vetted for expertise in regulated sectors, contingent labour models, and compliance-focused delivery. What sets us apart is how we work. While many consultancies and brokers offer surface-level recommendations, Magic Connect provides hands-on support to ensure every solution is effectively implemented, integrated, and aligned with the client’s existing structure. This includes onboarding assistance, internal communications, and full activation via Work Wiz—our mobile-first platform that centralises engagement, benefits, payslips, and wellbeing tools.

*Findings of the Benifex Big Benefits Report 2025/26 are based on insights from 3,500+ employees and HR leaders across seven regions worldwide and 12 industries from energy and utilities, financial services, healthcare and manufacturing, to media, pharmaceutical, professional services, public sector, retail, technology, and transport and logistics.