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A new report by the Resolution Foundation finds that UK households are around £2,900 a year worse off than they might otherwise have been after five years of rising prices.
What the £2,900 Figure Means
The £2,900 figure does not mean every family has lost that amount. It reflects the gap between actual household income and what was forecasted before the cost-of-living crisis.
It is based on a comparison between real income outcomes and earlier projections for non-pensioner households in 2026–27.
Specifically:
- Household income fell by around £450 after taking rising prices into account.
- Forecasted income growth was expected to be a certain amount.
- The difference between these two figures is approximately £2,900.
This estimate is for the median household, not the average. It does not apply to all households equally.
How Prices Have Changed
Inflation first rose above the Bank of England’s 2% target in May 2021, peaking at 11.1% in 2022.
Prices are now nearly 30% higher than in July 2021—equivalent to 13 years of normal inflation in just five years.
While inflation has dropped to 3.1% in August 2026, prices remain elevated. This means many everyday costs are still significantly higher than pre-crisis levels.
Energy Bills Remain a Major Pressure
Households reduced energy use by 13% between 2022 and 2023.
Despite this, energy spending increased by 57% after inflation adjustment during the crisis.
As of October 2026, Ofgem’s energy price cap increased by 4%, bringing the typical annual cap to £1,723 for a household using standard amounts and paying by Direct Debit.
This cap does not apply to all customers—those on fixed tariffs are not affected.
The Resolution Foundation warns inflation could rise above 4% in early 2027 due to energy market pressures. This is a forecast, not a confirmed change.
Households Are Still Falling Behind on Bills
As of March 2026, 18% of households in the poorer half were behind on utility or household bills—up from one in ten in September 2020.
Among poorer renters, 22% were behind on rent—nearly double the 2020 rate.
The Bank of England has also noted rising credit card default rates, with lenders expecting further increases.
What Help Is Available?
The Resolution Foundation recommends that government support focus on low-income households, especially energy costs.
It does not propose new payments or changes to benefits. There is no £2,900 government payment available.
Practical steps for those struggling include:
- Check your energy tariff—compare fixed deals versus standard variable tariffs.
- Speak to your supplier about affordable payment plans.
- Check eligibility for energy or council tax support.
- Seek free debt advice if behind on multiple bills.
For more guidance on managing bills, see our cost-of-living guide.
Why the Crisis Is Still Being Felt
Even with lower inflation, the cumulative effect of rising prices has left many households struggling.
The £2,900 figure highlights how income expectations were unmet, and why financial strain persists.
It shows that the cost-of-living crisis has created lasting impacts, especially for lower-income families.
While inflation has eased, the real cost of living remains high for many.
For more on how to manage essential costs, visit our Skint Dad page.
