According to the Office for National Statistics (ONS), overall inflation in the UK is back at the 40-year high first seen in July (after dipping to 9.9% in August), resulting in growing concern about both personal and business expenditure.
According to the BBC, 85% of people are now worried about the rising cost of living. This is up from 69% in a similar poll in January this year and, as a result, nine out of 10 people are trying to save money by delaying putting the heating on.
Last month, Randstad asked 700 people if they’d rather work from home or commute to work to save money, in light of energy bills being so expensive. The response was pretty much split between 40% saying they would rather spend the cost commuting than using energy at home, and 39% opting to work from home, while 21% opted for a hybrid model of working from home and office work.
Reinforcing the severity of the strain on expenditure, over half (55%) of the visitors to Randstad’s website who answered the question ‘Would you consider taking, or have taken a second job to pay for the increased cost of living?’ said yes, they would consider this.
To gain a better understanding of the current economic climate, we enlisted the expertise of Tim Harford, the Financial Times’ Undercover Economist, author, and BBC More or Less presenter to break down for us the impact of the cost of living crisis and its toll on the economy.
The 60-minute exclusive webinar session for Randstad clients, jobseekers and workers focused on all of the key issues affecting people all around the UK, such as, interest rates, mortgages, employment rates, tax and much more.
To kick things off, Tim shared some interesting insight framed as ‘Three things to worry about and three things to be cheerful about’:
Tim’s things to worry about in today’s economy:
1.Energy
Energy is absolutely fundamental to the functioning of an economy. About 10% of all spend in the British economy is on energy, a figure that is increasing sharply. This is simply because we don’t have enough of it. Due to the way the electricity markets work, including in the UK, the price of gas sets the price of electricity we consume. As gas prices rapidly rise, it’s driving food price inflation, rising day-to-day bills, and driving government expenditure. As we’ve all been hearing, it’s a worry and putting a huge strain on households.
2. Jobs
We recently saw the number of payrolled employees hit an all-time high at 29.7 million as the unemployment rate improves, sitting at 3.5% - the lowest since 1974. The bad news is that there’s an awful lot of people who are of an age where they could be working, but who are not working.
In some cases that’s voluntary and appropriate, for example parents caring for their children full time, or students. Those individuals are in the population of who we classify as ‘economically inactive’. If you go back 10 years, there was a steady decline of economically inactive individuals. Since the pandemic, the number has been rising in the UK. This has resulted in a lot of people not working, who could be working, in a tight job market where employers are struggling to fill core roles. Therefore, we’ve simultaneously got lots of people who have chosen not to work, and employers that can’t recruit people. That’s not a recipe for a well-functioning economy.
3. Disruption
With the government shaking things up, there are some real problems that have been created by the resulting uncertainties. Every day, businesses are making decisions on whether to spend money to make money. In today’s economy, with mounting uncertainty, is this a good idea? Uncertainty is causing businesses to delay investment. Since 2016 we’ve seen one source of uncertainty after another - Brexit, covid pandemic and multiple prime ministers. This is holding business spending back, and therefore impacting the economy.
Tim’s things to be cheerful about in today’s economy:
1. Energy
European economies are adapting to Russia turning off their gas supplies. They are figuring out other ways to keep going. There’s also been a big switch to liquefied natural gas from the Middle East - something that we’re making more use of and our European counterparts are starting to utilise as well. The flexibility and resilience displayed is reassuring and inspiring. Renewable energy is getting cheaper and going through a cost revolution. In the long term, this is excellent news for energy prices and a cleaner environment helping us address climate change.
2. Jobs
It’s amazing how many jobs there are out there; it’s amazing how low the unemployment rate is. It’s reassuring to hear that it’s easier for people to find a job at this moment in time. The data on what unemployment is like for mental health highlights that it’s clear that it can be depressing - that’s over and above any financial impact on not having a job. A strong jobs’ market is wonderful news. Although inflation is something that is worrying to everyone, if there was a choice to have to cope with rising inflation or a lack of jobs, a lack of jobs would be the greater worry.
3. Disruption
A bit paradoxical, but there is something to be gained by shaking things up. For example, a study on the impact of a 48-hour tube strike in London a few years ago revealed that when half of London’s stations were closed down, people were finding new ways to get to work. When the strikes were lifted, while the majority went back to their original method of travel, tens of thousands of people never went back. They realised they had been ‘commuting wrong’ their entire working lives. This brief period of disruption provoked people to look around and find different and better ways to do things. Shaking things up, or by imposing constraints on people by blocking familiar ways of doing things, can lead to people finding new, potentially more positive, alternatives. This might be true of the energy markets too. Sometimes the new solution is better than the old one.
Find more information and advice on saving money and combating the cost of living crisis here:
To register for the next instalment of Randstad’s Expert Echo webinar series, visit https://www.randstad.co.uk/employers/webinars/