Workers face fresh cost of living squeeze says new report

Research by the Work Foundation at Lancaster University says many families remain financially vulnerable after several years of high inflation, leaving little room to absorb another increase in everyday costs.

The warning comes as higher energy and fuel prices, linked to ongoing instability in the Middle East, threaten to erode workers’ spending power once again.

Pay rises could struggle to keep up

The report found relatively few employers are planning to increase pay by more than inflation this year.

A survey of 1,000 senior business leaders found that just over one in five employers expect to offer above-inflation pay rises during 2026.

That raises concerns that many workers could once again see their wages struggle to keep pace with rising living costs.

While most employers said they are helping staff cope with higher household bills through workplace benefits or other support, not everyone is receiving extra help.

The research found that one in seven employers are not providing any cost-of-living support for workers.

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Households have little financial resilience

Ben Harrison, director of the Work Foundation at Lancaster University, said: “A sluggish economy and ongoing global instability risks further intensifying cost-of-living pressures that workers across the country are already facing.

“Repeated periods of stagnant wage growth and sustained increases in the cost of essentials have left many households with little financial resilience to cope with any further economic shocks.”

He said employers were also facing rising costs themselves: “Most employers are actively looking for ways to support their staff, but many are facing the pressures of rising costs too.”

Harrison added: “This underlines the importance of Andy Burnham’s recent promise to prioritise short-term cost-of-living relief, and for the Government to focus on delivering good growth in every postcode in the years ahead.”