Navigating the Cost-of-Living Crisis in the UK - Understanding the Key Research Findings
- Magic Connect
- Feb 23
- 4 min read
Updated: Mar 18
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.
Why are we still in a cost-of-living crisis
UK inflation peaked at 11.1% in late 2022, the highest in over four decades, and while it has since cooled down, the cost of everyday essentials is 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.
These figures highlight the continuing reality of the UK cost of living crisis, particularly for households already on tight budgets.
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 such as adequate heating or nutritious food. In practical terms, this means more people are struggling to cope with everyday life, resulting in shocks of setbacks like job changes, illnesses or emergency expenses hitting harder than they would have been just a few years ago.
Impact on mental health and well-being
The financial effects of the cost-of-living crisis are 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.
Financial stress is closely linked to:
Anxiety and depression
Sleep disruption
Feelings of hopelessness
Reduced overall well-being
Meanwhile, workplace research points to a silent productivity crisis, with financial worries distracting workers, driving stress and contributing to absence and disengagement at work.
Impact on employees, employers and workplace benefits
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 shows:
Half of 16–25-year-olds say the cost-of-living crisis has impacted them more than the pandemic.
Many report daily financial anxiety.
A significant number have altered career ambitions or life plans due to financial pressure.
For younger workers, rising housing costs, student debt and economic pressures are raising concerns about long-term inequality and opportunity.
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 homes and workplaces throughout the UK.
Who can help?
As workforce reward, pay and engagement solution experts, Magic Connect specialises in working with businesses and matching 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.
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.
