When office workers in London step out for their lunchtime "meal deal" of a sandwich, snack and soft drink, they are likely to feel inflation bite.
The increased cost of being a commuter in the UK capital has certainly become stark over the past 12 months.
Belt-tightening is the norm nowadays, with many foregoing their morning caffeine boost and making their own packed lunches.
UK inflation remains a problem despite the recent small decrease to 10.5 per cent in the 12 months to December, compared to 10.7 the month before, according to the latest figures from the Office for National Statistics.
Downwards pressure on inflation came mostly from transport, particularly fuel costs, clothing, footwear and recreation. Food, restaurants and hotels prices provided upwards pressure.
Alpesh Paleja, lead economist at the employers' organisation the Confederation of British Industry, said: “These figures add to a growing body of evidence that the UK has passed peak inflation. Over the coming year, inflation should fall further towards single digits, as global price pressures ease and an economic downturn takes some of the heat out of price setting.
“Despite this, the cost-of-living crisis will continue to be a very real problem for both households and businesses, as price pressures remain high in the short-term.”
Government plan to push down inflation
British Prime Minister Rishi Sunak this month pledged that his government “will halve inflation this year to ease the cost of living and give people financial security”.
Well, perhaps. Economists said it could remain high for months.
To fulfil such a promise, inflation will have to drop 5.35 per cent by the end of the year, which is certainly a possibility if forecasts from the Bank of England are to be believed.
The bank predicts that UK inflation in the fourth quarter will be 5.2 per cent. The Treasury's forecast is 5.1 per cent.
Predictions on inflation are arrived at using similar methodology but a slight variation in input.
For example, European gas prices are now falling, but when will that have a follow-through effect on UK households' energy bills?
Food price inflation remains strong — in December it was 13.3 per cent, up from 12.4 per cent the month before, figures from the British Retail Consortium suggested.
Last week, the UK's big supermarkets were bragging about bumper Christmas figures, but many analysts said much of the sales revenue growth was the result of increased prices, not increased volumes.
Commuters' concerns
So, how have the price rises of the past year taken more out of the pockets of London commuters?
Estimates vary widely as to exactly how many commuters travel in and out of the UK's capital every day, but it is somewhere between one and three million people, with the average journey lasting slightly more than an hour.
However, the increase in hybrid working following the coronavirus pandemic will have had an effect on commuter numbers.
But, for the sake of argument, let's create a commuter.
He lives in Edmonton Green, part of the London Borough of Enfield in north London, about 13km from his workplace in central London.
Edmonton Green is in Transport for London's Zone 4, meaning that almost two years ago, our commuter paid £53.20 a week for a Travelcard to come into central London every weekday.
Last March, that fare went up by £2 — or 3.8 per cent — to £55.20. In March this year, if Transport for London uses the maximum price rise cap of 5.9 per cent, he'll be paying £58.45 a week. That's £224.51 a month, or £2,338.27 a year.
If that happens, our commuter's transport cost will have increased by 10 per cent in two years.
Coffee wake-up call
Let's assume that he stops off for a coffee on his way to work, buying a flat white at one of the many Costa Coffee outlets in central London.
Costa Coffee has put up its prices twice in the past year. According to figures collated by The Sun, the cost of a flat white has risen 32 per cent since late 2021.
All the major coffee shops in central London, including Starbucks and Nero, charge much the same for their products and were badly hit by the lockdowns of the pandemic years.
Also, wholesale coffee prices have been rising lately, not least due to rising shipping costs but also a drought in South America that has caused stockpiles of Arabica beans to fall to a 22-year low.
Meal deals
If our commuter goes out at lunchtime for a meal deal, he's likely to be paying more than he was a year ago, depending on where he chooses.
At the pharmacy chain Boots, he could be paying up to 19 per cent more, while at supermarket chain Tesco, the price of meal deals has risen by about 11 per cent.
Comparing lunchtime meal deals is tricky, though, as there are issues of quality and preference. Also, combinations exist not only between retailers but within the shops themselves.
For much of the past 20 years, those making the daily trip to work in the UK capital barely perceived the price rises over a year, let alone a month.
But London's commuters are starting to notice price rises now and many are taking steps to mitigate the effects of inflation.
But the advent of hybrid working has enabled many to save on transport costs. By working from home for two or three days a week, commuters have discovered, through the pandemic lockdowns, a way of reducing their outlay.
Nonetheless, to a large extent, inflation for most commuters starts at home.
Household energy bills rose by 54 per cent last April and then by a further 27 per cent in October. Despite current falling prices in the European wholesale gas market, energy bills in the UK are set for another 20 per cent increase in April.
The monthly price for newly rented properties across the UK has shot up by 7.7 per cent in the past year, according to estate agent Hamptons International.
At the same time, 800,000 mortgage holders will come off their fixed-rate products this year, as the era of cheap money comes to an end. With the Bank of England raising rates for a year now, those looking for refinancing may have to pay double what they were used to. Those with £500,000 mortgages could see their monthly payments jump by more than £1,000.
So, while our commuter has seen rises in his daily commuting costs, in some ways he's finding they are far lower than the percentage increases in his energy and mortgage costs.
Either way, small sighs of relief will be breathed if inflation continues to fall each month this year. UK Chancellor Jeremy Hunt said on Wednesday that high inflation was “a nightmare for family budgets.”
“While any fall in inflation is welcome, we have a plan to go further and halve inflation this year, reduce debt, and grow the economy — but it is vital that we take the difficult decisions needed and see the plan through.”
