Household energy costs in the UK are projected to climb by 16% this coming January, signaling the most significant increase in four years. According to forecasts from consultancy Cornwall Insight shared with the BBC, the typical annual bill for dual-fuel households could reach £1,999, placing substantial strain on families during the coldest months.
The prediction arrives just ahead of an anticipated 4% price cap adjustment by regulator Ofgem this Thursday, which will raise the typical annual bill to £1,723. This modest rise is largely attributed to the government’s temporary VAT cut on electricity, which saves consumers approximately £45 yearly. Without this intervention, the October increase would have been considerably higher.
Prime Minister Andy Burnham addressed the growing financial pressure during the Labour conference in Liverpool, stating he did not dismiss warnings of a crisis as exaggerated. “We’re looking at any measure that can give people breathing space, that can take the pressure off,” Burnham told BBC Radio 4’s Today programme, highlighting the difficulty posed by rising costs for home energy and fuel.
Craig Lowrey, a principal consultant at Cornwall Insight, emphasized that the timing exacerbates the hardship. “January is already a difficult month for many, with cold weather and bank balances still recovering from Christmas,” he said. Lowrey attributed the predicted surge to disrupted gas supplies stemming from the conflict in the Middle East and depleted European storage levels. He cautioned that rebuilding these stocks could sustain high prices well beyond the winter season, describing a January increase as “all but certain.”
Simone Rossi, chief executive of EDF Energy, warned the UK is approaching a “second energy crisis” comparable to the one experienced four years prior. In an exclusive interview, Rossi urged the government to extend the reduction of VAT on electricity bills beyond its scheduled expiration in April. Additionally, he called for approval of the Jackdaw gas field off the coast of Aberdeen and the Rosebank oil project near Shetland.
The financial outlook is grim for consumers like Aaron Richards from Maidenhead, who noted that daily expenses continue to escalate. Driving a diesel vehicle, Richards faces record-high commute costs while attempting to manage his budget by working overtime and reducing discretionary spending. “I just feel like everything’s going up,” he said. “Someone’s got to step in.”
Compounding the issue, recent Ofgem data reveals that customers collectively owe suppliers more than £5 billion in unpaid bills and charges. Adam Scorer, chief executive of the fuel poverty charity National Energy Action, described the situation as unsustainable for both households and the market. He called on the upcoming Budget to deliver targeted support for vulnerable families and fund a proposed debt relief scheme.
While Ofgem will not finalize the actual January price cap until late November, industry consensus suggests that without a truce in the Middle East or a drop in international energy costs, the forecasted spike remains highly probable.
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