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Resolution Foundation analysis says working families are £2,900 a year worse off than they would have been if inflation had remained near its 2% norm over the past five years. The report links the squeeze to successive economic and geopolitical shocks, with poorer households hit hardest and the think-tank urging targeted help as public finances tighten.
Working families are £2,900 a year worse off than they would have been if inflation had stayed near its usual 2% rate over the past five years, according to new analysis by the Resolution Foundation. The think-tank says successive price shocks have sharply raised household costs, while the poorest families have faced the greatest pressure because essentials make up more of their spending.
The analysis compares the inflation households experienced with a hypothetical path in which prices rose at about 2% a year. It says the shocks of the past five years delivered the equivalent of 13 years of inflation at that rate, leaving prices by this summer nearly 30% higher than in 2021. The £2,900 figure is an annual measure of how much worse off working families are under that comparison; it is not a claim that every family lost the same amount.
The report describes households responding to higher costs by turning down heating or falling behind on bills. It identifies energy costs as central to the squeeze, with higher fuel and utility prices also feeding into food costs. The analysis says poorer households were hit harder because price rises for essential goods were steeper and those goods account for a larger share of their budgets.
The report comes amid further pressure on household budgets. The source article says average five-year mortgage deals topped 6% this week, the first time in three years, and that energy bills were expected to rise by a further 16% next January. Those figures describe the situation and forecast reported on October 8, 2026; the source does not provide later confirmation of the forecast.
Why the £2,900 Gap Matters
The estimate gives a measure of the cumulative effect of unusually high inflation, rather than describing a single price rise or one-off bill. For families already spending more on energy, food and housing, the gap can mean less room to manage routine expenses, save, or absorb another increase. The report’s examples of reduced heating and missed bill payments show how financial pressure can affect both household comfort and financial stability.
The analysis also raises a policy question: who can be supported if costs rise again. The Resolution Foundation says tighter public finances leave less capacity for a broad package like the one used during the 2022 energy crisis. It argues that assistance should be concentrated on poorer households facing the greatest hardship. That is the think-tank’s recommendation, not a government policy announcement.
For readers, the distinction between the £2,900 estimate and an individual household’s experience matters. The figure is based on a comparison with a lower-inflation scenario, and actual effects vary with income, spending patterns, housing costs and energy use. It signals the scale of the aggregate squeeze but does not calculate what a particular family has lost.
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Five Years of Price Shocks
The report traces the inflation surge to a series of shocks. First, the global economy reopened after the Covid pandemic, while supply chains were disrupted. Russia’s full-scale invasion of Ukraine in 2022 then contributed to higher inflation, which the source says reached as much as 11%. More recently, conflict involving Iran and disruption to energy supplies from the Middle East have pushed oil and gas prices higher, according to the report’s account.
These events affected prices through different channels, but energy is a connecting factor in the analysis. Higher energy costs reach households directly through heating and fuel bills and can raise the costs of producing and transporting goods, including food. The report says essential items experienced steeper inflation, helping explain why lower-income households were more exposed.
The current report follows earlier government intervention during the 2022 energy crisis. The Resolution Foundation warns that repeating expensive, broad-based support may not be feasible under the present state of public finances. Its proposed alternative is more targeted support, particularly for energy bills, although the report does not set out a detailed government plan.
“Unfortunately, help is needed just when the public finances leave less room than ever to provide it.”
— James Smith, chief economist at the Resolution Foundation
Household Losses and Energy Outlook
The £2,900 annual estimate is a comparison with inflation of around 2% a year, not a direct account of each family’s income or spending. The supplied report summary does not detail the calculation method, the precise definition of “working families,” or how the estimate varies across household types. Those details would be needed to judge how closely the headline figure fits a particular household.
The outlook for energy costs is also uncertain. The article reports a forecast of a 16% rise next January, but does not identify the forecasting body or provide assumptions behind that estimate. It attributes recent energy-market pressure to conflict and disrupted supplies, but does not establish how long those effects will last or how much they will add to individual bills.
No government response to the think-tank’s recommendation is included in the source material. It is not clear whether ministers will introduce targeted assistance, which households might qualify, or how any scheme would be funded. The analysis also does not quantify the separate contribution of mortgage costs to the £2,900 comparison.
Possible Support and Next Bills
The immediate household issue is whether the reported energy-bill forecast for next January is borne out and how much of any increase reaches customers. Families will also face changes in mortgage costs as deals expire or new borrowing is arranged, but the report does not predict individual repayments.
The next policy development to watch is whether the government responds to the Resolution Foundation’s call for targeted help. Any proposal would need to specify eligibility, the level of support and its funding; none is provided in the source material. Until then, the report’s recommendation remains a policy argument rather than a confirmed scheme.
Further detail about the analysis itself would help readers assess how the average estimate applies across income groups and household circumstances. The source material does not state when such a breakdown or follow-up assessment will be released.
Key Questions
What does the £2,900 figure mean?
It is the Resolution Foundation’s estimate of how much worse off working families are per year compared with a scenario where inflation stayed near 2% a year over the past five years. It does not mean every family lost £2,900.
Who was hit hardest by the cost-of-living squeeze?
The report says poorer households were hit hardest because essential goods rose in price more steeply and take up a larger share of their spending.
What caused the rise in prices described in the report?
The analysis points to disrupted supply chains after the pandemic, Russia’s invasion of Ukraine in 2022, and more recent conflict-related pressure on energy supplies from the Middle East. It identifies energy costs as a major driver that also affected food prices.
Has the government announced new help for families?
The source material does not report a new government support scheme. The Resolution Foundation is calling for any future assistance to be targeted at poorer families, particularly to help with energy bills.
Is the forecast energy-bill rise confirmed?
The source article reported that bills were expected to rise by 16% next January. It does not identify the forecast’s source or provide later confirmation, so the increase should be treated as a reported expectation, not a confirmed final bill change.
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