A deteriorating cost-of-living situation in the United Kingdom is likely to worsen, with millions of people expected to pay up to 80% more each year on their household energy bills beginning in October.

On Friday, the United Kingdom’s energy regulator will release the current price limit, which is the maximum amount that gas companies can charge customers per unit of energy. According to analyst estimates, people could pay up to £3,600 ($4,240) per year for heating and electricity.

Scores are already struggling to make ends meet as inflation touched 10.1% last month, the most in 40 years, and fast rising energy and food prices are sure to affect the poor hardest.

The government is under pressure to do more to provide relief, but no new measures are expected before the Conservative Party choose a new prime minister to replace Boris Johnson.

Here’s a look at how energy prices are rising in the United Kingdom:


So far this year, annual energy expenditures for the average home paying by direct debit have jumped by a record 54%. Bills are now limited to 1,971 pounds ($2,320) per year, up from around 1,200 pounds last winter.

According to the revised price cap announced on Friday, average home energy costs would rise to roughly 3,600 pounds per year beginning in October. They are projected to exceed 4,000 pounds when the price cap is adjusted again in January.

According to Citi, massive energy cost increases might propel U.K. inflation to 18% next year. The Bank of England forecasts a recession later this year.

Charities and public health professionals worry that rising energy costs will be a “catastrophe” for poorer people this winter, forcing an increasing number to choose between heating their homes and putting food on the table.

The Office of Gas and Electricity Markets, the energy regulator, stated that the quarterly report is intended to reduce volatility in the energy market, allowing energy suppliers to better manage their risks and avoid unexpected cost spikes for consumers.


Since last year, global oil and gas prices have risen substantially as economies throughout the world recovered from the coronavirus pandemic and demand for energy increased. Russia’s war in Ukraine triggered a full-fledged energy crisis, with Moscow reducing or cutting off natural gas supplies to European countries that rely on the fuel to power industry, produce electricity, and heat and chill homes.

Natural gas prices have reached record highs as a result of shrinking supplies, increased demand, and worries of a complete Russian shutdown, further stoking inflation that has hampered people’s capacity to spend and heightened the possibility of a recession in Europe and the United Kingdom.

“There is no sign of the market finding a new equilibrium,” said Rystad Energy analyst Lu Ming Pang. “Market sentiment is a mix of price record fatigue and quiet acceptance that this new normal is here to stay,” says one analyst.

Despite the fact that Britain only imports a small portion of its gas from Russia, the United Kingdom relies on gas more than its European neighbors since it has fewer nuclear and renewable energy. It also lacks the capacity to stockpile gas, requiring it to purchase on the short-term spot market, where prices are more volatile.


Officials claim to have set up a package of support worth 37 billion pounds to help with living expenses. This winter, all households will receive 400 pounds off their energy bills, and millions of low-income people will receive an additional 650 pounds.

The steps have been widely condemned as insufficient, but no new policy is likely until until September 5, when the Conservatives select their new leader.

Some, notably the opposition Labour Party, have urged officials to dramatically enhance financial assistance for families while also freezing the energy price cap. Labour proposed funding it by increasing the government’s temporary levy on oil and gas corporations’ windfall earnings.

Neither Liz Truss nor Rishi Sunak, the two candidates for Prime Minister, appear to support such a scheme.

Some opponents blame the problem on the United Kingdom’s fully privatized energy industry, which can be traced back to Margaret Thatcher’s liberalization campaign in the 1980s.

The energy market is “fundamentally broken,” according to Giovanna Speciale, CEO of the Southeast London Community Energy group, which assists families in need with their household expenses.

“400 pounds or 1,200 pounds in government assistance isn’t going to help much — these are just sticking plasters,” Speciale explained. “What we need to address are systemic issues.” Because the system is totally private, the government has very little power to intervene.”


Other European countries’ energy prices are rising as well, although consumers in some countries have not faced the same amount of skyrocketing bills as the United Kingdom.

Gas prices in France are locked at October 2021 levels, and the freeze has been prolonged until the end of the year as a result of a government directive issued in June. Low- and middle-income households will also receive 100 euros to cover the cost of gas and electricity.

In Germany, average household power prices increased by 38% in the last year. A proposed tax to help energy providers acquire more expensive natural gas would cost an ordinary home several hundred euros each year. To counteract these expenditures, the government is temporarily decreasing natural gas taxes from 19% to 7% and has approved one-time financial assistance.

During legislative election campaigns in Italy, there has also been an increase in proposals for an energy price ceiling. Following prior assistance, the government set aside 8.4 billion euros this month to assist low-income people and companies in mitigating the increase in energy bills.

Source: Reuters


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