British households are bracing for a significant increase in energy bills from July, with forecasts indicating a rise of more than £200, signaling a challenging winter of high costs exacerbated by the Iran conflict.
Ofgem price cap announcement
Ofgem is set to unveil the new energy price cap for July to September on Wednesday, covering typical dual fuel households across Great Britain. Analysts at Cornwall Insight last week projected a £209 increase, raising the cap to £1,850 from July—a 13 percent jump from April’s £1,641.
The cap establishes a maximum unit price, meaning consumers pay based on their usage. While summer months offer some relief, concerns are mounting ahead of the October review, when energy demand typically surges as temperatures drop.
Outlook for October
Cornwall Insight forecasts that the October cap will remain similar to July’s level, due to physical damage to infrastructure and lingering supply disruptions, even if the Middle East conflict de-escalates.
Government response
Calls have intensified for the Government to outline measures to support the most vulnerable. However, Chancellor Rachel Reeves stopped short of announcing immediate energy-related actions in her cost-of-living plan.
She told MPs last week: “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.”
Impact of Iran conflict
Energy costs have skyrocketed due to Iran’s blockade of the crucial Strait of Hormuz shipping route, through which a fifth of the world’s oil and gas is transported. Households have yet to feel the full impact, as the price cap is reviewed quarterly. April saw a 7 percent drop thanks to Government measures, including moving 75 percent of the cost of the UK’s renewables obligation from household bills to general taxation and scrapping the energy company obligation scheme.
Campaigner warnings
Campaigners have warned of an “extremely difficult winter” ahead for the most vulnerable without additional support on bills. 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 insists that “tackling the affordability crisis is our number one priority.” Its support package so far includes a cut in VAT on attraction tickets over the summer holidays, 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 types of food products.
However, the lack of further action on energy bills is seen as holding back spending by cash-strapped consumers. Economist Martin Beck at WPI Strategy noted that recent official figures showing lower retail sales in April were already a sign that “energy pressures are biting.” He added: “Higher petrol prices, the prospect of an increase in household energy bills in July and weakening consumer sentiment all point to a more cautious spending backdrop.”
