Photo by Aleks Marinkovic on Unsplash

The British people are facing a serious cost-crunch in terms of their cost of living as heating costs surge up to 50% while taxes climb and inflation eats away at people's earnings - all while Bank of England chief Andrew Bailey urges the British people not to ask for raises this year - a comment that landed him in hot water earlier this week.

Like in the US, inflation in the UK has surged to its highest annualized reading in December since March 1992 (5.4%, compared with 7% in the US).

Fortunately for Britons on the dole, their welfare payments will increase by 3.1% in April, HMG announced earlier this month.

Meanwhile, the latest official data showed that average earnings fell by around 1% in November from a year earlier, when adjusted to take inflation into account. That marked the first decline in wages since the height of the coronavirus pandemic. On the other hand, taxes on earned income increased by 1.25 percentage points from April to help HMG pay for social care costs, according to PM Boris Johnson.

On Friday, data from the UK's Office for National Statistics revealed that between Jan. 19 and Jan. 30, one in five British adults said they had found it difficult to pay their bills over the prior month.

Here's more from CNBC:

More than two-thirds of adults also said their cost of living had increased since November, with the most reported reason for this being the increased cost of food. The ONS interviewed almost 3,500 people.

In the four weeks to Jan. 23, grocery prices in the U.K. rose by 3.8% compared to the same period a year earlier, data from analytics firm Kantar shows. The company’s analysis looked at year-on-year price changes of more than 75,000 products.

“Taken over the course of a 12-month period, this rise in prices could add an extra £180 ($244) to the average household’s annual grocery bill,” Fraser McKevitt, head of retail and consumer insight at Kantar, said via email.

“We’re now likely to see shoppers striving to keep costs down by searching for cheaper products and promotions.”

And Tesco Chairman John Allan told the BBC during an interview on the channel's Sunday morning program that "the worst is yet to come" in terms of rising food prices (for Americans who aren't familiar, Tesco is one of Britain's biggest supermarket chains). The rate of food inflation would likely hit 5% this spring, Allan said, as energy costs and other factors continued to rise.

What's more, Sonali Punhani, UK economist at Credit Suisse, predicted that the Bank of England will tighten monetary policy further this year, which in turn would put the brakes on inflation by the second half of the year.

"We think the BoE could hike rates again by 25 basis points in March 2022, sooner than our previous forecast of May 2022,” he said in an emailed statement.

"In the second half of 2022, inflation is expected to fall, which could reduce the pressure on the BoE to hike rates. Our view is that despite the fall in inflation in H2 2022, further monetary tightening is warranted, and we forecast three further rate hikes in 2022 and three hikes in 2023. We think the drop in inflation is likely to slow the hiking cycle, but not stop it."

As we explained earlier this week, the UK's reliance on natural gas as its primary energy source has resulted in the country and its utilities being squeezed by surging LNG prices, since the country has become increasingly reliant on imported LNG. rather than using the abundant coal found throughout Great Britain.

The last two years have already devastated small businesses. Now, they will be forced to make another round of "impossible choices", while millions of cash-strapped consumers are forced to do the same.