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  • Muna Said, Registry Trust

Monday, 25th September 2023

Last month our analyst, Muna Said, delved into the connections between non-discretionary costs, consumer debt and increasing rates of consumer judgments. This month we focus on the role of energy costs in this matrix.

Prior to 2023 the U.K. saw a trend of consumers struggling to keep up with non-discretionary costs including energy bills. Average energy prices increased from £1,042 in October 2020 to £1,138 in April 2021. By March 2022, 3.4 million individuals were in arrears with their energy bills. One month later in April 2022 there was another energy price increase of 54%.

Energy bills were set to increase yet again in April 2023 by an additional 20%, but with one month to spare (March 2023), there was an announcement made by the U.K. government that the latest increase would be delayed until July 2023.  Then in July the government announced an annual price cap of £2,074 for dual fuel households which represented a reduction on the original 20% increase. But even with this reduction, the average household still faces an additional £870 increase on top of the already incurred increases in April 2021 and 2022. What will this mean for the pre-2023 trend of unaffordable consumer costs for core needs such as energy?

In Spring 2023, 66% of U.K. adults reported that they were very worried about their bills. And the number of individuals unable to pay their energy bills continues to grow, totalling 5.5 million in April 2023, an additional 2.1 million people in arrears with their energy bills than in March last year.  It is estimated that 16% of the U.K. adult population (4.5 million) are considering a second job just to keep up with the cost of living crisis.

Energy companies, however, are recording large profits. British Gas, for example, reported profits rising to £969 million in 2023. And while energy companies profit, it is projected that 2023 fuel poverty will increase to 14.4% up from 13.4% in 2022. Average household debt currently stands at £65,434, up by £1,852 compared to 2022.

Viable suggestions to address untenable energy costs are thin on the ground. One organisation (Debt Justice) suggests the creation of a ‘Help to Repay’ scheme to tackle the £2 billion of energy debt weighing down U.K. households. But given that energy costs are only one of the non-discretionary costs consumers are struggling to manage, even a successful energy cost relief scheme will only form part of the overall consumer debt solution.