Two years ago, a two-litre bottle of supermarket olive oil cost about £7. Step into your local branch today and that same bottle will set you back more than £16. Grab a packet of pasta, or some broccoli, and you will pay 95% and 50% more, respectively, than in 2022. If your car insurance renewal is due, that will be an extra 35%-50%.
The Russian invasion of Ukraine almost 26 months ago set off a chain reaction that caused energy and food bills to jump, and ultimately sent inflation in the UK spiralling, reaching a peak of 11.1% in October 2022, the highest rate in 41 years.
On Wednesday, the Office for National Statistics will reveal the inflation figures for March. While consumer price inflation is expected to continue to fall, following February’s 3.8% figure, shoppers (and prime ministers) may have to wait a further month to see a more substantial decrease.
Even as inflation slows, it has taken a toll on our budgets. Analysis by the Observer shows British households are now spending between 35% and 50% more for products and services than in April 2022, from eggs and energy, to mortgages and Marmite.
It is not just the Ukraine war that is to blame. Poor harvests, exacerbated by climate change, helped to push up the price of some foods, while worker shortages and higher labour costs also kept inflation high. Supply issues, caused in part by Brexit, have not helped, and then the infamous Liz Truss budget sent the mortgage market into chaos.
Will there be an end in sight on Wednesday? Last week the Organisation for Economic Co-operation and Development (OECD) said food inflation declined for the 15th consecutive month across its 38 member countries from 6.3% in January to 5.3% in February.
Tesco’s chief executive, Ken Murphy, said last week that inflationary pressures had “lessened substantially”. But he warned that the costs of some key commodities including cocoa, coffee, potatoes and crude oil had continued to rise sharply.
Once items become more expensive, they rarely get cheaper. Even if inflation falls to zero, olive oil is unlikely to return to £6 a bottle. Virgin Media probably won’t cut your broadband bill, and no one really expects Pret to drop the price of coffee.
So what have the past two years really done to our finances?
Energy bills: up 54%
Before the Ukraine war, average gas and electricity bills were about £1,100 a year, but two months after the Russian invasion, the regulator Ofgem increased the energy price cap by 54%, adding a further £700 to average bills.
Falling wholesale prices have led Ofgem to reduce the price cap and, on 1 April, the new cap saw bills drop by 12%, from £1,928 to £1,690 a year for a typical household paying by direct debit.
So, after a turbulent two years, bills are about £590 or 54% higher on average than in March 2022. For some, the latest drop will still not be enough: in January, Citizens Advice warned that 5.3 million people currently live in households in debt to their home energy supplier.
Broadband and mobile phones: up 23%
About 11 million broadband customers and 36 million mobile customers are on contracts with inflation-linked price rises built in, according to the regulator Ofcom.
Last April, when inflation was at its highest, some broadband and mobile customers saw their bills increase by 17.9% – with a further 8.8% rise this month. On average, bills have risen by 23% over the last two years.
Households with a broadband and mobile contract costing £334 a year in 2022 (the average, according to the comparison site uSwitch) are now paying an extra £77 a year for broadband connection – assuming they haven’t switched suppliers. Broadband customers can save an average of £179 a year by switching their provider. Mobile customers could save £321 a year by switching to a SIM-only contract when they reach the end of a 24-month handset contract,” says Richard Neudegg, director of regulation at Uswitch.com.
Someone on a typical £35 a month handset and data mobile plan has seen their annual mobile bill rise by £97 over the last two years.
Food
Olive oil has seen the most eye-watering price increases in the past two years. The average bottle has gone up by 89%, according to ONS figures.
It’s not the only product affected: broccoli now costs 50% more than two years ago (up from £1.66 to £2.52 a kilo), while cucumbers have risen 39p. Cheese, flour and baked beans have all gone up. Branded tins cost £1.04 in February 2024, compared with 76p in April 2022. One big driver of food inflation has been budget ranges: a “basics” 500g bag of pasta was 50p two years ago; now it’s 95p.
Reasons for the increases vary. Frozen foods had been affected because they were disproportionately reliant on energy through manufacturing and distribution, said Alex Lawrence, of consumer behaviour company Circana.
A pack of four frozen beef burgers was £2.43 two years ago. Today it will set you back £3.59 – a 50% increase. It’s a similar story for oven chips, with prices up 46%.
Olive groves across Europe were hit by the hottest summer on record last year, including wildfires. In Spain, the world’s largest olive oil producer, supermarket bottles have been fitted with security tags to tackle a surge in shoplifting by criminal gangs. Chocolate has also been affected by the climate crisis, with the market price for cocoa now 132% higher than in March 2022.
Eggs, hit by bird flu as well as energy costs, have gone from £2.40 a dozen in April 2022 to £3.30 in February 2024, a 37% increase.
Restaurant prices have been hit by the costs – and difficulty – of hiring staff; a main course is up from £13.19 in April 2022 to £15.38 in February 2022, a 17% increase. Takeaways have risen even more, with fish and chips climbing from £7.90 in 2022 to £9.66.
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The daily takeaway coffee is also looking increasingly unaffordable. A 12oz regular latte from Pret was £2.95 in 2022, and is now £3.50. At Danish chain Joe & the Juice a cappuccino is now £4.30.
Housing
Households looking to fix their monthly mortgage bill face much bigger payments than those who took the plunge in early April 2022 – typically 35% or £4,700 a year more.
The mortgage market has been on a rollercoaster ride since the disastrous September 2022 mini-budget helped push many new fixed-rate deals to above 6%. At the start of this year they dropped sharply, only to later start creeping back up.
In April 2022, the average new two-year fixed-rate mortgage was 2.86%, but at the start of this month, the equivalent figure was 5.8%, according to Moneyfacts.
Using the example of someone taking out a £237,000, 25-year, repayment mortgage the monthly payment for a borrower on a 2.86% rate in April 2022 would have been £1,107. The figure for the April 2024 borrower paying 5.8% would be £1,499 – an increase of 35%.
For a five-year fix, the typical increase is almost 28%.
Average private rents in Great Britain have climbed to record highs, mainly because demand greatly outstrips supply, but exacerbated by landlords with buy-to-let mortgages trying to pass on sharp increases in interest rates.
The most recent figures from the property website Rightmove show that the typical advertised private rent outside London for properties coming on to the market has leapt by 17.6% since the end of March 2022 – from £1,088 to £1,280. In the capital, typical rents are up by 20% over the same period – from £2,193 to £2,631.
Car insurance
The extraordinary rise in car insurance premiums has been one of the biggest hits to household incomes over the past two years – in many cases premiums have doubled to more than £1,000 a year.
The Association of British Insurers says drivers were paying an average of £414 in early 2022. By the end of 2023, this rose to £627, up 51%.
One of Britain’s biggest insurers, Admiral, recently said it put premiums up 35% during 2023 alone. The Office for National Statistics says prices have risen by 47% over the past 12 months.
Julie Daniels, motor insurance expert at Compare the Market, said young drivers had seen the steepest increases. “The average [quoted] premium for a driver aged under 25 has risen by £915 over the past 24 months to reach £2,077. Previous high inflation rates will have probably affected many areas of the motor repair industry, including the cost of spare parts, energy and hiring specialist mechanics.”
Train fares
Train tickets in England and Wales have seen annual increases in both years – a 5.9% increase in March 2023 and a further 4.9% in March this year.
It means an annual season ticket from Woking to London has increased from £3,664 to £4,072 – an 11.1% increase.
A typical rail user who buys an annual season ticket between Liverpool and Manchester has seen the cost increase from £2,864 to £3,180 – an extra £316.
