The latest inflation figure leaves UK households collectively needing to find an extra £18bn a year to maintain their standard of living enjoyed 12 months ago, according to MGM Advantage.

The latest data shows UK inflation (consumer price index or CPI for short) grew by 2.8% in July, down slightly from 2.9% in June.

Each household will typically need to spend an extra £704 a year to maintain their standard of living from just one year ago. The recent Bank of England policy guidance suggested it is more likely than not that CPI inflation over the next 12 – 18 months will be 0.5% or more above the 2% target. This means the pressure on everyday living costs will continue to be felt for some time to come, MGM Advantage said.

Aston Goodey from MGM Advantage said: “Higher prices for everyday essentials like energy, fuel and food are being felt by households across the country. Many people are struggling, feeling the constant pressure to find the extra money or trying to find savings elsewhere, especially when wage growth is subdued.

“Over the last five years, the main contributors to inflation have been food and drink, housing, energy and transport costs, which have on average contributed over half of the inflation each month. This is particularly damaging for people in retirement.

“Over a typical retirement, inflation can wipe out 50% of a persons’ purchasing power. With 90% of people at retirement choosing a level income from their annuity, the real impact of inflation will be felt in every weekly shop or energy bill.”