Energy costs for millions of households in the UK rose by 54 percent. It is causing problems for people across the United Kingdom. It’s the second major increase in energy bills since October. However, a third could be on the way as demand picks up post-pandemic and now with Russia’s war in Ukraine.
The biggest driver of growing consumer prices is energy costs. While inflation is a global occurrence, it is a greater concern in the United Kingdom. Especially, since it is more vulnerable to rising natural gas prices than its gas-dependent European neighbors. Natural gas prices, used to generate electricity and heat, have more than doubled in the last year.
Economists in the United Kingdom are predicting the largest loss in living standards since the mid-1950s, owing to rising energy costs, food prices, and anticipated tax rises. According to the Office for Budget Responsibility, disposable household income will fall by an average of 2.2 percent this year, adjusted for inflation. These estimates hide the impact of the crisis on low-income people, who have been disproportionately affected.
British households will see their real wages fall by 6% this year
According to the Joseph Rowntree Foundation, a think tank focusing on raising living standards, the poorest quarter of British households will see their real wages fall by 6% this year because they spend a bigger percentage of their budgets on food and energy. People relying on government benefits and state pensions are facing troubles twice as hard because their annual cost-of-living adjustments are based on annual inflation estimates through September before consumer prices skyrocketed.
The national price cap was updated on Friday, causing energy prices to climb for 22 million homes. The adjustment happens every six months by regulators. In comparison to other European Union countries, Britain relies more heavily on natural gas to cover its energy demands, with less nuclear and renewable energy.
Some European governments have been more aggressive in their cost-cutting efforts than the British government. This year, France pushed a state-owned utility to cap electricity price hikes at 4%. Spain has a tax on windfall profits from energy producers, passing it soon to the consumers.