Energy shock to hit poorest hardest as UK incomes fall £480

The Resolution Foundation highlights a renewed squeeze on UK living standards, with real incomes now expected to fall by 0.6%, leaving households £480 worse off on average. However, the impact is uneven: lower-income households, with a higher proportion of spending on essentials like energy and transport, face a larger real income hit as rising petrol and utility prices absorb a greater share of disposable income.

In contrast, higher-income groups are better cushioned. Longer term, reducing exposure to volatile global energy markets—through renewables investment, improved energy efficiency, and diversification of supply—could stabilise prices and protect living standards.

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1. Explain how living standards can be measured.

2. Assess the likely income elasticity of demand for energy and transport for low- and high-income households.

3. Discuss the extent to which increasing investment in renewables, energy efficiency, and diversification of energy supply could improve UK living standards.