Britain’s domestic energy price cap is expected to rise to more than 4,200 pounds a year in January, up 230% from last year, a leading economic forecasting group said on Tuesday, deepening a cost-of-living crisis.
Last week, the Bank of England warned that Britain is on the way to a long recession as unprecedented energy prices push inflation to 13%.
Yet while governments across Europe scramble to increase gas storage and reduce use, Britain’s political response has been largely stalled by the race to elect a new prime minister.
Forecasting group Cornwall Insight said the cap on a typical household energy contract is expected to rise by 82% in October, taking the average annual gas and electricity bill to £3,582 due to a sharp rise in wholesale costs, according to a new estimate. and changes in the way the cap is installed.
The cap is expected to rise to £4,266 a year in January, Cornwall said, up from a previous forecast of £3,616.
A spokesman for outgoing leader Boris Johnson said on Monday that the new prime minister – either Foreign Secretary Liz Truss or former finance minister Rishi Sunak – must come up with a response to the soaring bills once they take office on September 5. followed by a poll of members of the ruling Conservative Party.
The delay comes despite increased calls from charities, business groups and politicians for the government to act immediately and provide more support for households.
“It is vital that the government uses our forecasts to drive a review of the support package on offer to consumers,” Craig Lowry, principal consultant at Cornwall Insight, said in a statement.
Catastrophic growth
Cornwall Insight’s estimate has been revised above following changes made to the way the limit is calculated by regulator Ofgem.
Ofgem said the January forecast should be treated with caution due to volatility in wholesale markets.
Ed Miliband, the opposition Labour’s energy spokesman, described the rise as “disastrous”, while consumer campaigner Martin Lewis said it would leave many people destitute and that the “zombie” government needed to wake up.
Mark Harper, a Conservative lawmaker and Sunak supporter, told Sky News the ruling party had failed to produce a plan because the two candidates fundamentally disagreed on the way forward, and Sunak had promised more direct support for households and the Trust. prospective tax cuts.
Cornwall said the forecast increase is due in part to a change in the way the price cap is calculated.
Energy suppliers typically hedge or purchase energy in advance to protect against price shocks, but many have struggled to keep up with volatile and record high wholesale gas prices over the past year, when more than 20 suppliers went bankrupt.
Ofgem said last week that suppliers could cover some of their hedging costs by adding them to household bills over a shorter period of time.
Cornwall’s Lowry said it may be time to discuss whether the price cap needs to be replaced.
