Events in the gulf have led to rising energy costs, higher transport prices, stock-market turbulence, and the potential for increased prices for food and other goods. These changes could affect inflation, interest rates, UK government borrowing, business costs, retirement plans, economic growth, the labour market, and the standard of living. Even if turbulence were to in the next few weeks, it could take months for economies to fully recover.

In the UK, people and business are already being more careful with their financial decisions. As forecasts indicate an increase in the cost of everyday items, employees are cutting back on their discretionary spending. However, as Office for National Statistics (ONS) data shows, lower income groups face a higher rate of inflation than higher income groups. This is because they spend a larger share of their budget on essentials such as housing, food, heating, and lighting, which are expected to rise more than other items used to calculate the official measure of inflation. ONS analysis finds that more people reported that their cost of living had increased in March compared with a month ago. 

Similarly, organisations are looking at how to respond to higher business costs, and weighing up how much can be passed on to the consumer and how much they might need to absorb. 

Workplace implications

The CIPD’s UK Good Work Index 2026 finds that 32% of more than 5000 employees surveyed reported that money worries had affected their ability to do their job in the past 12 months. While 39% of workers earning up to £20,000 annually reported this, 25% of those earning £60,000 or more also said the same.

Similarly, while 40% of low-waged earners answered that they were keeping up with all their bills and commitments without any difficulties, only 67% of high earners could say the same. Our research was carried out at the beginning of 2026. 

So, even before unfolding events in the gulf, our research found that many low-waged workers were already in a precarious financial situation, as were a significant proportion of those earning £60,000 or more. Without action, employee financial stresses could have negative consequences for the workplace.

How can employers help?

Given how a decline in living standards could affect employers, it is important that reward and HR professionals review how they can best support workers during this period. Ideally, employers should have an employee financial wellbeing strategy or policy. This CIPD resource can help you create one for your employer.

While only 15% of all UK workplace have this according to the CIPD’s Reward Survey: Focus on employee benefits, supported by Everywhen, this percentage rises to 53% among those employers with 250 or more people. In addition, another 8% plan to introduce one this year, especially those with between 100 and 249 staff (15%).

Our research shows that the main reasons for having or introducing a strategy or policy are to improve:

  • the overall mental and physical well-being of our employees (43%)
  • the performance of both the organisation and its people (43%)
  • employee stress levels (39%)
  • employee financial wellbeing (39%)

Large employers are more likely to cite the above reasons, as well as wanting to use it to enhance their brand and reputation among employees, customers, and trade unions.

In addition, earlier CIPD research finds that by creating and then communicating a financial wellbeing strategy, employers can stand out in the labour market. Our survey of 2500 workers found that 59% of them believed it’s important that their present employer has a policy to support and improve their financial wellbeing. When it comes to looking for their next job, 65% said it is important that a future employer does this. This demonstrates  a strong business case for investing in the financial wellbeing of workers.

The CIPD’s Reward Survey shows many other ways employers are already supporting the financial wellness of their people, including:

  • 55% regularly review their pay structures, levels, rises, bonuses/incentives to ensure that they are fair
  • 38% pay at least the voluntary living wage
  • 26% are open and transparent with employees about the pay and benefits on offer, why they're provided, and what people need to do to receive them
  • 26% regularly review the benefits package to ensure that it's fair
  • 25% guarantee all employees at least 16 hours of paid work a week (unless the worker requests otherwise)

So, there are practical steps UK employers can take to reduce the impact of the rising cost of living on their staff. Some measures are relatively low cost, such as directing employees to reliable sources of financial information and guidance, including the Money and Pensions Service, or introducing payroll savings schemes to help workers build funds for emergencies.  

About the author

Charles Cotton, Senior Performance and Reward Adviser, CIPD

Charles has recently led research into the business case for pensions, how front line managers make and communicate reward decisions, and managing reward risks, as well as the creation of a good practice guide on the annual pay review process. He is also responsible for the CIPD’s public policy work in the area of reward and is a Chartered Fellow of the CIPD.