UK cost-of-living squeeze deepens

Fresh data in the briefing show 7.4 million households are struggling to afford basic essentials, underscoring how broad the pressure has become. The consumer price backdrop is still elevated, with the CPI forecast rising 0.89% in July after a 0.42% decline in June, while the broader index sits far above pre-pandemic levels. Even with unemployment at 4.2% and payroll employment near 158.984 million, pay gains are not keeping up with the cost of shelter and daily necessities.

For investors, the story points to a consumer under strain. Retailers serving lower-income households, utilities and landlords face a more cautious customer base, while companies tied to discretionary spending may see demand soften if families are forced to prioritise rent and bills. It also reinforces pressure on policymakers, who must balance fiscal restraint against the risk of deepening hardship and weakening household consumption.

The narrative is straightforward: employment is holding up, but real purchasing power is not. Unless wages accelerate or living costs ease, Britain’s poorest households are likely to remain trapped in a spending squeeze that has broader implications for growth, credit quality and social stability.