The UK energy price cap is set to increase in October to a record-shattering £2,800, with the average UK household anticipated to pay an additional £800 per year in energy bills.
The entire country is on track to pay an extra £18.3 billion in energy costs from October 2022, just as the cold weather starts to settle into houses and family requirements for heating surge.
The move follows April’s price cap rise of 54%, which sent consumer bills through the roof with an estimated £700 per year in extra energy expenses.
Meanwhile, the CPI hit a 40-year high of 9% in April, as the cost of living crisis began to eat into consumer pandemic savings and into credit allowances, and borrowing started to climb on the backs of desperate families struggling to catch up with spiking costs.
“The hike is even more stark when we consider that in September last year the average bill was £1,138 – an amount that seemed a lot at the time but has been eclipsed now,” said AJ Bell head of personal finance Laura Suter.
“It means the average household will have to find an extra £1,662 just to pay for the same energy to heat their homes or cook their food over the past year.”
An estimated 22 million people are currently on the price cap tariff, double the number the same time last year.
“What’s tough for most households is that there is no other option – all the fixed rate deals out there are far higher than October’s price cap rate,” said Suter.
“What’s more, Ofgem’s planned changes to the price cap mean that people need to brace for another potential increase just three months after this one.”
Consumers are set to struggle at the worst time for financial relief, as the war in Ukraine continues to send the price of foodstuffs including wheat surging, and supply chain impacts cripple companies until they can’t afford to absorb the expenses any further, sending prices spiking across the board.
The price cap rise will impact the most vulnerable in the UK, and without urgent government intervention, the rising tide of energy costs will continue to swallow consumer wallets whole.
“At £2,800 the average energy bill will now represent 30% of the annual state pension payment for a single person and 70% of the amount a single person gets each year from Universal Credit,” said Suter.
“It now feels almost impossible that the Government can ignore the pressure these rising bills are putting on the lowest income households.”
The pressure is now on Rishi Sunak to deliver tangible change in his Summer Statement in response to struggling household calls for support with bills.
“The Government isn’t short of ideas that have been suggested, from turning the £200 energy loan scheme into a grant, or increasing the Warm Home Discount, to bringing forward benefit increases or handing out another council tax rebate,” said Suter.
“But waiting until October to announce any handouts feels both unlikely and cruel to those families struggling now.”