Living standards for most people in the UK have declined steadily since the financial crisis of 2008. Over the last 6 years pay rises have been relatively low. There have been pay cuts and pay freezes for some, but over the same period prices have risen significantly. The combination of inflation and low-income growth has caused what the mainstream media calls a cost of living crisis. How has this situation come about, and what are the impacts of high inflation and a fall in the purchasing power of wages for UK firms?
Inflation is a fall in the value of money that causes an increase in the cost of living. Inflation means that £1 buys far fewer goods and services today than it did in the past. For example, today £1 would only buy one or two bags of crisps, but when I was a child in the late 1970s £1 would have bought 20 bags of crisps.
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