British households are set to face a significant increase in energy bills from July, with forecasts predicting a rise of over £200, driven by the ongoing conflict with Iran. Ofgem will announce the new energy price cap for July to September on Wednesday, covering typical dual fuel households across Great Britain. Analysts Cornwall Insight have predicted a £209 increase, raising the cap to £1,850 from July – a 13 per cent jump from April’s £1,641.
The cap sets a maximum unit price, meaning consumers pay for usage. While summer offers some relief, concerns loom for the October review, when energy demand surges as temperatures fall. Cornwall Insight forecasts the October cap will remain similar to July, due to physical infrastructure damage and lingering disrupted supply, even if the Middle East conflict de-escalates.
Energy costs have been sent rocketing higher by Iran’s move to block the crucial Strait of Hormuz shipping route, through which a fifth of the world’s oil and gas is carried. However, households have yet to feel the full impact, as the price cap is reviewed quarterly. April saw a 7 per cent drop thanks to Government measures, including moving 75 per cent of the cost of the UK’s renewables obligation from household bills to general taxation, and scrapping the energy company obligation scheme.
Calls have been mounting for the Government to set out action to support the most vulnerable. Chancellor Rachel Reeves told MPs: “We stand ready to act if market conditions worsen significantly later this year and I have been leading cross-Government contingency work on design of potential future targeted and temporary support for businesses.” Campaigners have warned over an “extremely difficult winter” ahead without extra support. Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Households need reassurance and support, not a summer of suspense. That means the Government must act before winter to spell out what support will be available.”
The Government has insisted that “tackling the affordability crisis is our number one priority”. Its package of support measures so far includes a cut in VAT on attraction tickets over summer, free bus travel for children in England during August, extending the 5p-per-litre fuel duty reduction, and lowering import tariffs on more than 100 food products. But the lack of further action on energy bills is seen as holding back spending. Economist Martin Beck at WPI Strategy said recent official figures showing lower retail sales in April were already a sign that “energy pressures are biting”.
