The UK faces a winter of unaffordable energy bills after the price cap was raised by 80 per cent, experts have said.
Energy regulator Ofgem announced this morning (August 26) that the price cap, which limits the amount a household will pay for annual energy bills, will rise to £3,549 a year from October.
Current forecasts show the cap could rise to over £6,000 next spring.
While the cap changes have been known about for some time, the change will still come as a shock when the reality of these figures sets in, said lead equity analyst at Hargreaves Lansdown, Sophie Lund-Yates.
“It’s likely to result in a further cooling of demand for discretionary items, and an increase in people struggling to purchase even the basics,” she said.
The price cap has increased the pressure on the two candidates for Conservative party leader, Liz Truss and Rishi Sunak, to outline their plans to assist UK consumers through the winter.
Lund-Yates said: “Whether tax cuts favoured by the Truss camp, or emergency payments preferred by Sunak, the reality is the energy crisis and its effects aren’t going away until the external forces at play are brought under control.”
Energy prices have risen significantly in the year-to-date, mainly due to the war in Ukraine, which has hampered supply and triggered a wave of sanctions against Russia.
“There’s no doubt that for many households a bleak winter is ahead,” said AJ Bell’s head of personal finance, Laura Suter.
Many households can’t afford energy bills at their current level, she added, let alone bills that are thousands of pounds a year more.
“Frustratingly for those struggling with energy costs there are no easy hacks or tricks to significantly cut their bills,” she said.
“The only option is to cut energy usage as much as possible and hope for further government support for those struggling the most.”
Senior personal finance analyst at Interactive Investor, Myron Jobson, said although no-one is immune from the stratospheric rise in energy bills, poorer households are being hit disproportionately.
“The government’s existing cost of living support measures will not stretch far enough to shield the most vulnerable members of society from rising cost of seemingly all areas of expenditure,” he said.
While the majority of IFAs’ clients might be discounted from the impact of these rises, even wealthy millionaires could see a drastic increase in living costs, said managing director at Perceptive Planning Phil Billingham.
For some, Billingham said, this cost could be absorbed. “For many, something will have to give. That could be holidays, eating out or presents for the family,” he explained.
“So are these people going to starve or endure real hardship? No, most certainly not. But are they worried, especially for family and friends who may not be so fortunate? Then most certainly yes, they are.”