The Ukraine crisis – what it means for your finances

The full horror of war in Ukraine have been unfolding hour by hour. For all of us, our overriding concern is for those caught up in the invasion. However, it also seems to be stretching further and faster, and could make a big difference to our lives and our finances too.

While our focus might be on what’s happening beyond our borders, we also need to be aware of issues set to hit our own lives – most notably, price rises and some of these could be on a dramatic scale.

This article isn’t personal advice, if you’re not sure what’s right for you, ask for financial advice.

The impact on your finances

Russia is the world’s second largest exporter of oil, so war and sanctions have had a profound impact on prices. The oil price spiked as soon as Russia invaded, and while it’s been volatile since, it’s continued to trend higher. At the time of writing, on Monday 7 March, it hit $139 a barrel – its highest price in 14 years. The immediate, noticeable impact is at the pumps. Petrol prices have soared above £1.55, and it’s expected to climb higher. Of course, the local forecourt price varies dramatically, so there’s every chance you could pay £1.70 or more.

It’s not just oil though.

Russia is also a major exporter of gas, so we’ve seen gas prices surge too. At the time of writing, the UK wholesale price for delivery in April hit £6.50 a therm, a new record high and up from just 40p a therm a year ago. The UK gets far less gas from Russia than elsewhere in Europe – at around 4%. But while this means we’re less exposed to the risk of shortages, less gas on the international market means higher prices worldwide. For the 85% of British homes with gas central heating, this is going to mean more pressure on prices.

The energy price cap means we’re not going to feel the impact on energy bills until October. However, we’ll still be reeling from the horror of the 54% rise in the energy price cap in April – up £693 a year.

The sheer scale of rising energy bills means it’s not just going to affect people whose finances were already on a knife edge. Those who consider themselves comfortable, who have always had plenty of wiggle room in their budget, could well start to face challenges too.

Rising oil and gas prices feed through into the price of everything that has to be manufactured or distributed. It means we’ll likely see widespread price rises well beyond the energy markets as we go through the spring.

This includes food, which faces additional pressures. Russia and Ukraine make up 29% of global wheat exports, 80% of sunflower oil, and 19% of corn. The UK isn’t among its main markets, but the war has already hiked up prices on the international market, where wheat futures have hit an all-time high. Shop prices are already rising at their fastest pace in a decade, and this is only going to make things worse.

What can you do?

1. Consider energy efficiency. For those with the available cash, the rising price of energy could mean it now pays to invest in efficiency measures you previously discounted – like a new, more efficient heating system or double glazing. But you don’t need to spend money to cut your bills. You can make a difference even with small steps like turning the thermostat down by one degree.
2. Check whether you could get any help with energy efficient home improvements. You could, for example, be able to get a loan through the Green Deal to cover the cost of the changes.
3. Keep your eyes peeled for fixed energy deals from your provider. The extra cost of fixed rate deals means that in the vast majority of cases, you’re better sticking with the price cap, but the threat of more rises in October means it’s worth keeping your eyes open. If your provider offers a fixed rate deal that’s only marginally above the April rate, it’s worth weighing up whether you’d rather pay marginally more for the next six months in return for the security of a fix.
4. Check whether you’re entitled to any support with energy bills. If you’re on a lower income, you can investigate whether you qualify for a grant from your provider or your local council.
5. Go back to your budget. If prices continue to rise, you might need to take a closer look at how to cut back on spending. Traditionally this meant going through bank statements and keeping a spending diary to identify areas where you can afford to spend less. Nowadays, if you have one, your banking app might do much of the hard work for you.
6. Cut back on how much you drive. Taking the car less in favour of walking, cycling or public transport is incredibly effective – assuming there are sensible and affordable options locally.
7. Consider how you drive. If you need to make a journey, you can make a big difference to fuel efficiency with better maintenance – like making sure your car’s serviced regularly and your tyres are properly inflated. You should also remove roof bars and boxes when you don’t need them, to cut down on air resistance. Driving styles are crucial too. Driving more slowly, in the highest appropriate gear and accelerating more gently are great ways to improve your fuel consumption.

In the face of war, it might feel peculiar to focus on cutting your energy costs and using the car less. However, we’re already struggling with the worst cost of living crisis in a generation, and the inflationary impact of the war is going to make life even harder. Taking a few steps now will help shelter your finances, and leave you free to focus on other important areas.

Editor's choice: our weekly email

Sign up to receive the week’s top investment stories from Hargreaves Lansdown

Please correct the following errors before you continue:

Existing client? Please log in to your account to automatically fill in the details below.

Title:

Please select... Mr Mrs Miss Ms Mx Dr Sir Rev

First name:

Last name:

Email address:

Main phone number: (optional)

Mobile phone number: (optional)

Date of birth: (optional)

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Title:

First name:

Last name:

Address:

Email address:

Where did you hear about us?

Please select... Mobile application Advert in the press Existing client Advert on another website Search Engine / Research HL mention on another website Recommendation from a friend HL mention in the media

Hargreaves Lansdown would like to contact you about the services we offer which may be of interest to you. We explain how we use your personal data in our Privacy Policy.

If you would rather not hear from us, please tick the relevant box(es) below:

Email - no thanks, please don't contact me via email

Post - no thanks, please don't contact me via post

Phone - no thanks, please don't contact me via phone

Register

Your postcode ends:

This is my postcode

Not your postcode? Enter your full address.

Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.