The Bank of England warned last week that the UK would enter recession later this year. The expected recession is expected to be the longest since the global financial crisis.
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A skyrocketing energy price cap and exorbitant rental prices are just two factors contributing to the deepening UK cost of living crisis described by chief legal and general counsel Nigel Wilson as “a tragedy for many, many people”.
People are “finding life really difficult with rising energy prices, rising food prices and a horrible backdrop for many people as they struggle to pay their bills,” Wilson said on Tuesday. to CNBC’s “Squawk Box Europe.”
His comments come as energy bills are set to rise to more than £4,200 ($5,088) a year from January, according to analysis by management consultancy Cornwall Insight. Meanwhile, rental prices are up 11% from a year ago, according to Zoopla, a UK property site.
Cornwall Insight predicts the January price cap will increase by more than £650, leaving a typical household to pay the equivalent of £4,266 each year for the first three months of 2023.
The forecast for the October 2022 price cap has also increased, rising by more than £200 to give an average bill of £3,582 a year.
The price cap, which is set by regulator Ofgem, was £1,400 per year in October 2021.
“While our price cap forecast has risen steadily since the summer 2022 cap was set in April, an increase of more than £650 in the January forecast is another shock,” said consultant Craig Lowrey. Principal at Cornwall Insight.
“The cost of living crisis was already front and center as more people face fuel poverty, this will only heighten concerns,” he added.
A household is defined as being in a situation of energy poverty if it cannot afford to heat or cool the house to an adequate temperature.
“A tsunami of fuel poverty”
Following the latest energy price cap forecasts, the End Fuel Poverty Coalition predicts that 9.2 million UK households (28.4%) will be in fuel poverty from October 1, rising to 10.5 million (32.6%) from January 1.
“A tsunami of fuel poverty will hit the country this winter and these latest estimates demonstrate once again that the level of support already pledged by the government is just a drop in the ocean,” said Simon Francis, coordinator of the End Fuel Poverty Coalition. .
The estimates also fuel Don’t Pay UK, a campaign encouraging people to cancel direct debits on their energy bills from October 1 if the UK government does not act to cut costs “to an affordable level”.
More than 94,000 people have pledged to strike so far, according to the campaign website.
A high street decorated with British Union Jack banners in Penistone, UK. The End Fuel Poverty Coalition has warned that “a tsunami of fuel poverty will hit the country this winter”.
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A UK government spokesman called the move “highly irresponsible”. Possible consequences of not paying energy bills on time include a supplier installing a prepayment meter in your home and disconnecting the power.
Prime Minister Boris Johnson has no short-term plans to act on the cost of living crisis, saying it is up to his successor to make those decisions, according to a spokesman.
This puts additional pressure on Conservative Party leadership candidates Rishi Sunak and Liz Truss to reveal their plans to tackle the deepening crisis.
Truss, the favorite to be Britain’s next prime minister, told the Financial Times she plans to cut taxes rather than offer cash handouts.
Sunak said via Twitter on Tuesday that there was “no doubt in [his] remember that more support will be needed” and that he will act “as soon as we know how much the bills will increase”.
The Bank of England warned last week that the UK would enter its longest recession since the global financial crisis by launching its highest interest rate in 27 years.
Rental prices are soaring
Meanwhile, rental prices in the UK rose 11% in May from a year earlier, according to Zoopla, with rental prices in London climbing 15.7%.
Prices are being driven by strong demand, particularly in city centers, but rising prices will begin to limit rental growth, according to the real estate site.
Independent legal organization Citizens Advice found in March that one in five tenants expected their rent to rise in 2022 and one in six were worried about being able to pay their rent in the coming months.