U.K. households are set for $24bn increase in energy bills in 2022
U.K. households are set for an 18-billion-pound ($24 billion) increase in energy bills next year, potentially squeezing consumer spending and adding pressure on the Bank of England to increase interest rates, according to Investec Plc.
A surge in gas prices has left the energy price cap -- the ceiling for what firms can charge for a unit of power -- on course to increase by 56% in April, to an average of 2,000 pounds per household a year, analysts Nathan Piper, Sandra Horsfield and Martin Young wrote in a report.
The increase could 1.8 percentages points to headline inflation in April. It also equates to about 1.3% of consumer spending, forcing Britons to reexamine their consumption patterns.
U.K. inflation jumped to 5.1% in November, the highest rate since 2011, prompting the central bank to raise borrowing costs this month for the first time since the start of the pandemic. A further energy-drive increase in inflation could prompt more action from the BOE, the analysts wrote.
To cover the increase in bills, households would have “cut back on discretionary spending on other items, eat into their excess savings built up during the pandemic” or “obtain higher wages from employers,” Investec said.
