UK Energy Bills Jump for Third Quarter, Weighing on Economy

The UK energy price cap will rise 6.4% in April, a third consecutive hike that will make it more difficult to achieve the government’s goal of lowering bills for households and businesses.

Consumer campaigners are warning that about half of adults expect to ration energy use in the coming months, according to polling by National Energy Action and YouGov. Households will be squeezed further as average UK water bills are also set to jump 26% from April, the biggest ever increase.

One of the Labour government’s main election pledges was to bring down bills after consumers were hit by the 2022 energy crisis that triggered a broader cost-of-living problem. This latest hike is a challenge to that pledge and could push more consumers into energy debt, a figure which is already at a record and risks dampening consumer spending.

“With bills likely to remain at this level for some time, we also need immediate action from the Government, working with Ofgem and suppliers, on making bills affordable for all and tackling the debt problem,” said Dhara Vyas, chief executive office of industry lobby group EnergyUK. 

Higher bills 

The higher bills are impacting the wider economy. The Bank of England expects inflation to peak at 3.7% in the third quarter following the higher price cap. Consumer confidence among households has also dropped, partly because of the rising cost of energy, other utilities and basics such as food.

“Consumption weakness isn’t going away,” Bank of England policymaker Swati Dhingra said Monday. Dhingra is one of two rate-setters pushing for sharper cuts as the UK economy stagnates and the labor market cools. Earlier this month, the BOE slashed its 2025 growth forecast for the UK to just 0.7%, amid fading expectations of a rebound in consumer spending.

The government also announced this morning proposals to expand a £150 winter energy bill discount to 2.7 million more households next winter. This comes after widespread criticism for cutting winter subsidies for pensioners knows as winter fuel payments.

“The way to deliver energy security and bring down bills for good is to deliver our mission to make Britain a clean energy superpower- with homegrown clean power that we in Britain control,” Ed Miliband, secretary of state for energy said in a statement.