Writing in the September issue of PBM, editor Paul Davies fears that the scale of the cost of living crisis continues to be “hopelessly understated”.
It really has been quite an extraordinary few weeks since the last column. The Prime Minister was finally, reluctantly, forced to tender his resignation and the nation has since been embroiled in a protracted saga to establish just who will be the new leader of the country. The contest, now whittled down to Foreign Secretary Liz Truss and former Chancellor Rishi Sunak, is due to be concluded on 5th September. Until then, it is undeniably a period of leadership limbo.
Against this backdrop, alarm bells are ringing ever-louder about the state of the economy and household finances. Inflation continues to surge upwards causing the Bank of England to raise interest rates to 1.75% in the biggest hike in 27 years, but the biggest concern is with the forecasted increase in the dual fuel energy price cap to an eye-watering £3,958 this winter.
For context, the figure was £1,277 in October 2021 yet the cap is predicted to reach £4,200 or higher in January. And we won’t begin to dwell on the fact that businesses don’t even have this level of ‘protection’…
“The cost of living crisis is already working its way up the income multiples — and the impact is being felt across the wider economy as rising fixed costs constrain any discretionary spending, from hospitality and retail to home improvement.”
Whilst many homeowners currently have the security of fixed rate mortgage deals and the sharpest spike in energy prices is still to come for most (those needing to renegotiate their deals this autumn), the cost of living crisis is already working its way up the income multiples — and the impact is being felt across the wider economy as rising fixed costs constrain any discretionary spending, from hospitality and retail to home improvement.
Global insights firm Dynata, for instance, recently polled over 1,000 British consumers and found that 60% say inflation has impacted their everyday life ‘completely’ or ‘a lot’, with the biggest effects being felt around the rising prices of around everyday goods (51%), gas/petrol (49%) and housing (40%) .
Consequently, compared with a year ago, almost seven in 10 people (68%) are buying fewer impulse items, half (50%) are buying cheaper products, 48% are buying fewer non-essential items and over four in 10 (44%) are dining out less often. And this is happening now.
The knock-on effects are similarly being reflected in industry data. For example, in addition to contending with rising materials prices and increased business costs themselves, the FMB’s Q2 2022 State of Trade Survey revealed that SME building firms are experiencing the lowest levels of enquiries for new work since the pandemic as “customers tighten their belts”.
The FMB is calling on the new government to “hit the ground running” in September with “ambitious solutions to stabilise the economy”, and once again emphasises how a VAT reduction on RMI work can act as a stimulus.
Analysis from the Energy and Climate Intelligence Unit (ECIU), meanwhile, has considered the additional impact rising bills will have on poorly insulated homes. Using the Energy Performance Certificate (EPC) system, it has found homes rated band F on are set to have a combined gas and electricity bill around £2,000 higher than one rated EPC band C (the Government’s target for 2035). The average UK home is rated band D, and these properties will pay around £600 more for their energy costs this winter than an EPC band C home.
No-one likes being a doomster or a gloomster, as our departing PM may have said. And equally, no want expects — or even really wants — the government to have all the answers, but the scale of this looming crisis currently seems to be hopelessly understated.
As with the pandemic, laissez-faire will have to give way to reality at some point with bold plans a necessity. Certainly, the industry would benefit from a concerted home improvement programme — we’ve been there before, and we all know what happened, but the stakes are now simply too large to get it wrong yet again.
Cover story: The industry is ‘turning yellow’ to mark Maddie’s Day on September 22. See page 11 for details.
