New report from the West Midlands Regional Economic Development Institute (WMREDI) reveals how the cost-of-living-crisis is impacting people and businesses.
The latest REDI-Updates briefing from the University of Birmingham’s West Midlands Regional Economic Development Institute (WMREDI) reveals how the cost-of-living-crisis is impacting people and businesses, and examines the supply-side failures driving it.
Since the end of the pandemic inflation has risen to its highest level in 40 years, hitting double digits in 2022 and 2023, with the cost of a basic food shop increasing 24.2% between March 2019 and March 2023.
REDI-Updates studies the impact of rapidly rising inflation on the local and national economy, analysing and evaluating the international, national, and local factors driving inflation and how rising prices are impacting both businesses and households. It also examines what actions these groups are taking to mitigate the impact of rising prices, for example, household food bank usage has risen 52% from pre-pandemic levels, as households struggle to afford essentials.
The research finds the impact of the crisis is not evenly distributed across businesses, households, or public sector services, with some industrial sectors, socio-economic groups and public sector services, being more greatly affected than others. The gap between the rich and poor is widening, with the inflation rate for the poorest 10% of households being 12.5% compared to 9.6% for the richest 10% of UK households. This uneven distribution of the impact of the crisis is likely to impact levelling up and equality goals in the UK.
The report also investigates how the UK compares internationally in the context of global inflation, to understand why inflation in the UK is remaining so high whilst it reduces in comparable countries. In the USA, inflation started to reduce after hitting just over 8%, whereas in the UK inflation climbed as high as 11%. While inflation is affecting many countries globally, the UK has been more significantly impacted by the crisis. This is largely due to ongoing long-run supply side issues unique to the UK, such as low productivity, the effects of Brexit and low private sector investment.
The fate of businesses and households are intertwined, both impacted and interacting with the cost-of-living crisis and each other, leading to a spiralling cycle of economic decline. If the supply-side issues driving the crisis are not tackled, then these issues will continue to weaken the UK economy, hindering and compounding the impact of future crises.
The report outlines evidence-based briefings summarising the complexities of the causes and effects of this shock, on businesses, households, and communities across UK regions. Robust academic analysis to reveal real-world challenges.
Director of City-REDI/WMREDI, Professor Simon Collinson says: “Our latest edition of REDI-Updates focuses on the serious impacts of the cost-of-living crisis and the supply-side failures driving it. The report outlines evidence-based briefings summarising the complexities of the causes and effects of this shock, on businesses, households, and communities across UK regions. Robust academic analysis to reveal real-world challenges.”
The impact of the cost-of-living has been affecting virtually every sector in the economy, and it will continue to do so in the foreseeable future.
Director of the West Midlands Regional Economic Development Institute (WMREDI) and City-REDI
Simon Collinson is Deputy Pro-Vice-Chancellor for Regional Economic Engagement and Director of the City-Region Economic Development Institute (City-REDI) at the University of Birmingham.
