A rise in the cost of living is reportedly to blame for the prolonged slump in the UK’s economic growth.

The credit crisis appears to be taking its toll, as demand for commodities falls, Richard Lambert, the CBI’s Director General, comments: “Having enjoyed two years of strong growth, we are now living in uncertain times. We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth.”

The latest forecast comes as the Conservatives release the ‘Cost of Living Under Labour’ report, which illustrates to what extent costs have risen since 1997. Consequently, the report highlights the recent price increases and the general rise in living costs, as a result of the current credit crisis.

Data from the report shows price increases over the last nine months since Gordon Brown became Prime Minister. Such price inclines include a 10 per cent rise in gas and electricity bills and various food cost increases such as the price of a loaf of bread today costing 28 per cent more.

The CBI’s Chief Economic Adviser, Ian McCafferty, comments on the recessional pinch, being felt by many Britons: “The UK economy is being buffeted by some strong headwinds, with the prolonged troubles in the financial markets making for a bumpier ride both this year and next.

“High commodity prices are adding to inflationary pressures and significantly squeezing household incomes. And some households are feeling a chill from the credit freeze, with lending conditions becoming tighter,” Mr. McCafferty concluded.

Recent research from Fool.co.uk shows that despite the bleak outlook, the majority of Britons are keen to take control of their finances and avoid being detrimentally affected by the credit crisis, no matter what the cost. According to Fool.co.uk 89 per cent of Britons are willing to give up luxuries such as take-aways in order to keep their heads above water.

Other luxuries Britons intend to cutback on include clothes shopping sprees, gadgets and toys, which coincides with the CBI’s reports of a slump in the UK’s economic growth.

David Kuo, Head of Personal Finance at Fool.co.uk, comments on the research: “When the going gets tough, the tough get going, and it’s reassuring to see that most of us are going to great lengths to cut non-essential spending from our budgets.

“During a recession, cash is King. And those with the leanest budgets will be best placed to not only survive the downturn but also generate cash.

“In order to enjoy jam tomorrow, we need to make sacrifices today, even if it means giving up the occasional Chinese takeaway. Downturns never last forever, and the recovery will feel so much sweeter if you endure a bit of sourness now.”

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