UK households set to face £200 energy bill rise thanks to Iran war
British households face a significant energy bill increase from July; forecasts predict an increase of over £200, pointing to a bitter winter of high costs due to the Iran war.
Ofgem will announce new energy price caps for July-September on Wednesday, covering typical dual-fuel homes in Great Britain. Analysts Cornwall Insight predicted last week that the cap had risen to £1,850 from July, predicting a rise of £209; this is a 13 per cent increase on £1,641 in April.
The cap sets the maximum unit price, meaning consumers pay for usage. While summer may provide some relief, concerns are emerging for the October review when energy demand increases as temperatures drop.
Cornwall Insight predicts that the October cap will remain similar to July due to physical infrastructure damage and ongoing supply disruption even as conflict in the Middle East subsides.
Calls are growing for the Government to take action to support the most vulnerable, but Chancellor Rachel Reeves has stopped short of any urgent energy measures in her cost of living plan.
He told MPs last week: “We are prepared to act if market conditions deteriorate significantly later this year and I am leading emergency cross-Government work on designing potential future targeted and temporary support for businesses.”
Energy costs have soared with Iran’s move to block the important Strait of Hormuz shipping route, through which one-fifth of the world’s oil and natural gas is carried.
But households have yet to feel the impact as the price cap is reviewed quarterly and saw a 7% drop in April thanks to government measures to reduce bills.
This involved transferring 75 per cent of the cost of the UK’s renewable energy liability from household bills to general taxation and scrapping the energy company liability scheme.
Campaigners have warned that without extra support on the bills, the most vulnerable will face an “extremely difficult winter”.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Households need reassurance and support, not a summer of uncertainty.
“This means the Government must take action to explain what support will be provided before winter.”
The government insisted that “tackling the mutual price crisis is our number one priority”.
The package of support measures so far includes a reduction in the VAT rate on event tickets over the summer holidays, free bus travel for children in England in August, an extension of the 5p per liter fuel duty discount and lowering import tariffs on more than 100 food products.
However, failure to take further action on energy bills is seen as restricting the spending of cash-strapped consumers.
Economist Martin Beck of WPI Strategy said the latest official figures showing retail sales falling in April were already a sign that “energy pressures are hurting”.
“Higher oil prices, the possibility of a rise in household energy bills in July and weakening consumer confidence all point to a more cautious spending environment,” he said.
