UK Inflation Could Reach 18% this Winter as Residents Face ‘Fuel Poverty’
August 24, 2022
Inflation in the U.K. could climb as high as 18% by January as the energy prices skyrocket, economists from Citi are projecting.
U.K. residents will see an additional 80% increase in their annual household energy bills after the nation’s energy regulator increased its latest price cap. That follows a record-setting 54% increase in April.
The new price cap, which sets the maximum amount that gas suppliers can charge customers per unit of energy, will take effect on October 1, just as the cold months begin.
The change will increase the average annual power bill for households from 1,971 pounds ($2,332) a year to 3,549 pounds ($4,163). Bills are expected to increase again in January, to potentially more than 4,000 pounds.
Inflation in the U.K. hit a 40-year high of 10.1% in July, which is the highest inflation rate among the G7 group of wealthiest nations, and the nation has seen disruptive strikes for months as workers push for higher wages to keep pace with the cost of living.
In response, the Bank of England hiked interest rates by 50 basis points earlier this month, its largest single increase since 1995. The Bank of England also projects that the energy crisis and fiscal tightening could lead to the U.K.’s longest recession since the global financial crisis. Its latest projection showed that inflation would peak at 13.3% in October.
EDF, a French utility company that also does business in the U.K., estimates that more than half of U.K. households will be in “fuel poverty,” meaning that they will have to spend more than 10% of their disposable income on energy costs.