The Cost Of Living Crisis’ Devastating Impact On Mental Health And How To Help

Lady crying at desk over cost of living crisis

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The UK is currently facing a cost of living crisis. From energy bills to the weekly food shop, prices have increased causing an increased financial strain for households and businesses alike. The Consumer Price Index (CPI), which is a weighted average of a basket of consumer goods and services, shows that prices have gone up 10.1% in July 2022 since the year before. In the same period, domestic gas and electricity prices have risen by 95% and 54% respectively, while wages struggle to meet this increase.

What is Causing the Cost of Living Crisis?

The cost of living crisis has been attributed a number of social, political and economic factors including the ongoing war in Ukraine, energy increases as well as the Covid-19 pandemic. There isn’t one single cause of the cost of living crisis, but it’s rather a combination of factors creating a ‘perfect storm’ for rising costs.

1. The New Normal?

The Covid-19 pandemic is a large culprit for the cost of living crisis. Previous lockdowns and closures of countries’ borders resulted in challenges to a number of industries including hospitality, leisure, travel and transport.

Supply chain issues

One element causing this crisis are worldwide supply chain issues. We are often used to having items delivered to us sometimes within a matter of hours. During the pandemic however, shipping companies decided to reduce capacity by 11% in anticipation of a reduction in demand – while the cost of shipping a large container increased fourfold by September 2021. To make things worse, the number of workers in these fields has dropped dramatically due to reductions in demand and government prohibitions during global lockdowns.

Faced with this, many workers in the industries listed above decided to retrain and work in other, more stable, sectors. For heavy goods vehicle (HGV) drivers, this number has dropped by 70,000 in the UK alone since the pandemic. This shortage of drivers also means that less goods that are able to be transported to and from the docks or cargo planes, including raw materials which are used to create other products. This worsens bottlenecks in the supply chain, and combined with rising fuel prices, transport companies and manufacturers have needed to pay much more to get items shipped and delivered than previously, which has often been passed onto customers.

cargo ship loaded with containers in dock

Reduction in production

Lockdowns across the world also resulted in factories shutting down or heavily reducing their production capacity. One key example of this is the production of semiconductors, which are used in the car manufacturing and healthcare industries, as well as other household electronics such as mobile phones, laptops and fridge-freezers. As we emerge from Covid-19, suppliers have been struggling to keep up with the newly found demand from consumers and are unable to maintain the supply they once had. If the demand goes up but the supply doesn’t, then the price of goods increases.

More, more, more!

The re-opening of the economies across the world has also ignited a surge in demand for consumers, with many happy to be spending again. During lockdowns, people were typically able to save more than normal, with 2020 savings increasing by 2.6 times and 2.3 times from 2019 in the United Kingdom and USA respectively. As shops began to reopen and consumer confidence regrew, this only added to the demand-side strain that the supply chain issues were already facing.

2. The Energy Crisis

Another ‘hot’ topic contributing to the cost of living crisis in the UK is energy. Since the beginning of 2021, 31 energy suppliers have gone bust. This was due to the market cost of natural gas increasing by four times than what it was in 2021, due to increased use in the winter of 2021 and a reduction in gas production as a whole. Industries have also been increasing production again, as demand picks up after lockdowns ceased. Lack of wind during the summer also meant that less electricity was generated, and therefore gas has been required to fill this demand. These factors, including the cost of transferring customers to new suppliers and network maintenance have all increased the cost of energy for energy firms.

Passing it on

Unfortunately, domestic and business customers are being hardest hit by this price increase. Every six months, the UK energy regulator Ofgem are permitted to review and cap the maximum amount that energy companies are allowed to charge their customers. In April, the average household saw a bill increase of 54% from £1,277 to £1,971 per year (or £693 per year). Estimates predict that this is set to rise to a staggering 70% on the 1st October, making the average bill £3,359 per year. All this is further exacerbated by the ongoing Russian invasion of Ukraine.

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cargo ship loaded with containers in dock

3. The Invasion of Ukraine

President Putin’s decision to invade Ukraine has unsurprisingly caused ripples across the globe beyond the tragic loss of human life. One reason that Russia is worsening the cost of living crisis is through the control of natural gas. Russia provides over 40% of Europe’s energy supply. Despite European countries looking for alternatives, this isn’t going to happen overnight. Moscow has also reduced supplies to Europe in retaliation to sanctions imposed due to war in Ukraine, cutting 40% of pipeline capacity in June and to 20% in late July causing gas prices increases of 13%.

Further, the war in Ukraine is severely hampering the food supply chain. Combined with Russia, the country exports over one-third (36%) of the world’s wheat, and the largest producer of sunflower oil. However, as sanctions on Russia are imposed and Ukrainian exports are halted, this has limited the global supply.

boy with stop ukraine placard

4. Wages

What is underpinning the cost of living crisis is the inability of wages and salaries to meet the increased prices. Real wages, which reflect the power of employee’s pay after taking inflation into account actually fell by 3% in the previous quarter – the fastest rate of decline since records began in 2001!

Can’t we just pay people more? Not unless we want inflation to get worse! The wage-price spiral is an economic term which describes an increase in inflation due to rises in wages. As worker’s get paid more, this increases the demand for goods and services as they have more money to spend causing prices to rise even further. As businesses are also paying more to their employees, their cost of production increases and this is then passed back to the buyer. This loop then continues, increasing inflation even more!

boy with stop ukraine placard

Money and mental health

It’s no surprise that with all of this added financial pressure, households and individuals are feeling stressed. As the cost of living increases, people are at a higher risk of falling into financial difficulties leading to the inability to pay for essential items such as food, heating or mortgage repayments.

How is the cost of living crisis impacting mental health?

Financial worries are a common driver for worsening mental health, with 72% of adults feeling stressed about money. Increased costs may leave households unable to afford basic necessities such as food, water or heating, affect relationships and social lives and create additional stress when opening letters or receiving emails. This emotional strain can have a long-lasting physical and mental impact, affecting sleep as well as increasing blood pressure, anxiety or depression.

Many people may feel feelings of guilt, tiredness or embarrassment from having money troubles, and this can often lead to them not reaching out for financial help when needed, or too afraid to face their financial situation.

Who are most at risk for mental health issues?

The cost of living crisis is impacting almost everyone, however three key societal groups stand out: those on lower incomes, those with existing mental health issues and children. 

Lower income households

Inflation isn’t always equal. Whilst the 9.4% inflation rate is the average across the UK, the top 10% poorest households are seeing a rate of 10.2% whilst the richest 10% are seeing 8.7%. In fact, the cost of living gap between the rich and poor is the highest since records began in 2006. This is due to increases in lower-cost food items and rising energy costs, with essential goods and services taking up a higher proportion of poorer household budgets.

For many in lower incomes, pre-payment energy meters are used to top up for electricity and gas. These are already nominally more expensive than standard credit meters, meaning poorer households lose out. This added strain is leading to a growth in the number of people missing key payments, or having to choose between heating or food in order to stay afloat. In fact, the Food Foundation warned that over two million adults in the UK have gone without food for a day because of the rising cost of living.

Pre-existing mental health issues

Another group that is more sensitive to the cost of living crisis are those with pre-existing mental health issues, with current symptoms potentially worsening their ability to manage their money.

Studies also suggest that those with existing with mental health issues are twice as likely to say they have been unable to cope with the rising cost of living, in comparison to those without. During times where mental health issues are prevalent, people may decide to overspend as a ‘treat’ to themselves. Whilst this works to a degree, this is only temporary and can worsen issues in the future.


Thirdly, a surprising cohort that is mentally vulnerable to the cost of living crisis are children. Mental health prevalence rates for children have already seen a over a 50% rise between 2017 and 2021, worsened by the Covid-19 pandemic. A study by charity The Childhood Trust identified that 47% of parents reported their children felt stress about the cost of living crisis, with 22% of children expressing more anger and 9% self-harming as a result.

Ways to protect your mental health

If the cost of living crisis is impacting you, there are a number of things you can do help with your mental and financial health.

1. Practice self care

Times may be tough, however that doesn’t mean you need to stop looking after yourself! Practising self care remains important to give you that needed stress relief from your day to day. Simply going on a walk, reading a book or giving a loved one a call can induce the happy hormones serotonin and dopamine from our brains and cost absolutely nothing! We’ve compiled a list of other self care ideas to give you inspiration!

2. Journalling

To help with mental health struggles, why not try writing things down. Studies have shown that when we write something with a pen and paper, we are able to process our emotions in a better way and promote a greater sense of achievement. Journalling can take many forms – while some may like to write long sentences, others prefer bullet points or structured notepads like these. The best part is, there’s no right or wrong way to go about it!

3. Challenge your mental health

It can be easy sometimes for negative thoughts to invade our brain, and cause a ‘snowball’ effect as we think about other thoughts and consequences. Taking a step back from the initial worry can help us analyse it in a more effective way and give us a new sense of perspective on the situation.

Why not try writing down the exact worry you have and giving evidence for and against that issue. Our Reframing Negative Thoughts notepads are designed to do just this, helping with emotional resilience the more you practice.

Top tips to manage your money

We understand that mental health is only one part of the cost of living crisis, and that financial worries tie in with these in a large way. Here we provide some financial tips on how to make your money go slightly further and provide mental relief during this difficult time.

1. Face your financial fears

Did you know, 1 in 5 Britons are more scared of checking their bank balance than heights or spiders. When financial struggles are prevalent, it can be very common to avoid the situation altogether. Writing a list of your financial fears can help you understand where this stress is coming from, and gives you a list to action one-by-one.

Not checking bank balances or opening letters may seem like a temporary fix, but can cause serious issues later down the line. Though daunting, be sure to check your finances regularly and take note of how much is going in, going out and when payments are due. Make sure to check whether you are able to claim any government support or benefits using websites like Entitled To to ensure that you are receiving what you can.

Once you have these figures, try and work out a budget for yourself on your essential bills such as your mortgage/rent, council tax, energy bills and any other creditors you have. Once you have this worked out, you’ll then realise what you have going forward to pay for everything else. Try identifying areas you can cut down on too, like your morning takeaway coffee or meals out – they all add up!

2. Ask the finance professionals

If budgeting is something you are unable to do yourself, don’t be afraid to seek financial help from a professional organisation. This doesn’t need to cost a penny and there are many bodies and charities out there like The Money Charity and Citizens Advice who can help answer any financial questions or worries you might have.

If you’ve fallen behind on payments to any creditors such as your energy suppliers or finance providers, make sure to get in contact with them as soon as possible to explain your situation. They may be able to support you with a repayment plan to help you get back on track, as well as stopping any additional late charges or interest in the meantime. Millions of people are feeling the pinch at the moment, so remember you aren’t alone. If you have multiple debts, charities like PayPlan can help talk to your creditors on your behalf and work out repayment plans with them all.

3. Shop around

With monthly bills getting higher and higher, remember to shop around when it comes to your utilities and insurance. Price comparison websites like GoCompare or USwitch can help you find  better deals that you may currently have and provide guidance on switching over. MoneySavingExpert is also full of financial advice including understanding your rights as a consumer and cash incentive deals happening at the moment.

Just because you’ve been with someone for a long time doesn’t mean they’re necessarily the best or cheapest. Comparing and switching between insurance firms and utility companies is often quick and easy, and a lot of the work can be done by the new suppliers themselves! So just sit back, and watch your money go further.


The cost of living crisis is having an immense impact on UK households currently, and is caused by a myriad of factors including the invasion of Ukraine, Covid-19 supply side issues and increases in global energy prices. 

Most people are feeling the pinch but those with pre-existing mental health conditions, children and those in low income households are being hardest hit financially and psychologically. 

Whilst we don’t foresee the cost of living crisis improving in the near future there are steps people can take to improve their financial and mental wellbeing, including getting professional help from charities, practising self care and reframing negative thoughts.

If your mental health is struggling, a list of free and confidential helplines can be found here.

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