What is behind soaring costs as inflation reaches a record 40-year high and how bad could it get?

Credit: Unsplash/PA

By ITV News Digital Journalist Jocelyn Evans

Inflation has hit a 40-year high as the cost of living, across the board, increases.

Here we look at what that means for day to day spending, explain what's driving the increase, and examine how much worse things can get.

  • The biggest price increases driving inflation:

Energy bills

The cost of natural gas went up 95.5% in the 12 months to April, according to the ONS.

The UK is forced to import a large amount of gas which makes up its largest electricity force at 40.1%, according to Our World in Data, which means energy bills increase.

From April, 22 million customers were impacted by the energy price cap increasing by 54% which meant bills went up.

Though the UK government offered a £200 rebate on energy bills from October, there have been calls for more to be done so it's not people shouldering the burden of these increases, but rather the energy companies.

In France, for example, the government intervened to limit energy bill increases to 4% - though the state does own the main energy provider.

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Petrol and diesel

Drivers are now spending 31.4% more to refuel than they were a year ago.

One of the things which affects the price of fuel is the supply and demand for crude oil, and its price globally. In general terms, the higher the price of crude oil, the higher price motorists pay at the pump.

Oil prices surged immediately after Russia’s invasion of Ukraine due to supply fears, leading to a rise in wholesale costs.

Petrol and diesel prices have reached new record highs, with the average cost of a litre of petrol at UK forecourts jumping to 167.6p this week, according to the latest figures.

Chancellor Rishi Sunak implemented a 5p per litre cut in fuel duty on March 23 to help cash-strapped motorists.

Motorists queued for hours for fuel amid panic-buying and shortages. Credit: PA

Furniture and maintenance

The cost of furniture and maintenance has seen a 10.7% increase in the year up to April.

Retailers say they've had to increase prices due to higher costs they're fielding as a result of hefty shipping, commodity and labour costs.

Going out - or staying in

Whether you choose to eat in or head to a restaurant or bar - the prices have gone up everywhere.

The cost of the bill at restaurants went up 8.1% in the past year. Drinking at a pub got more expensive too, with the cost of beer up 4.9% and wine rising 6.2%.

Alcohol prices increased less rapidly in off licences and supermarkets - but still went up.

The cost of takeaways has gone up too. Credit: PA

If that's enough to encourage you to stay in, the cost of food has also increased 6.7%.

The rise across meat categories was clear: lamb was the worst hit, up 14.2%, followed by poultry (10.4%) and beef (9.8%) while pork got off with a lighter 4.9% rise.

Butter prices rose 11.8% and the price of oils and other fats soared 18.2% over the last year after fears of a shortage sparked by the war in Ukraine.

The price of fresh milk also rose rapidly, up 13.2%, while sugar and preserves rose 12.2%.

Opting for a takeaway, meanwhile, will set you back 6.5% more than it would have done a year ago.

  • Why are things going up?

Inflation was already rising after the Covid pandemic hit global supply chains with a combination of pent-up demand and delays to shipping as factories across the world face lockdowns and worker absences.

Russia's invasion of Ukraine compounded the problem.

Russia and Ukraine aren't struggling to plant their wheat but getting it out of the country is a struggle. Credit: AP

The war has sent the price of fuel and energy to record levels in recent months as sanctions against President Vladimir Putin’s regime unfold.

The conflict is also sending food prices jumping higher due to the knock-on effect on some key ingredients, such as cooking oil and wheat, given that Ukraine and Russia are major producers of these commodities.

  • Are things going to get worse?

Unfortunately it's looking likely things will continue, and worsen.

Inflation is expected to rise even higher later this year when the next energy price cap review takes effect in October.

The Bank of England predicts inflation will peak at an eye-watering 10.25% in the autumn, which it has cautioned will leave the UK on the brink of recession as households rein in their spending.

Worse still, inflation doesn't hit everybody equal amount as people spend larger amounts of their budget on different things depending on their needs.

The Institute for Fiscal Studies reported that, although average inflation across products reached 9% in the year to April, the poorest households faced inflation rates of 10.9%.

That’s because the poorest households are spending a larger fraction of their budget (11%) on energy, compared to the richest household (they spend 4%).