Surging energy prices set to cause devastation for UK consumers
What do UK consumers think about the impact the energy increase will have on their lives, as well as trust and reputation within Energy markets and Government. Our research shows the heartbreaking impact rising energy bills will have on people in the UK.
When it comes to energy prices - trust in the UK Government is significantly lower (70%) than that of the Energy providers themselves (57%)
81% of adults say they are worried about upcoming energy bills
84% say it will have a direct impact on them or their families lives
What’s happening to the energy prices in the UK?
As of 1st April, the energy regulator, Ofgem, will raise the energy price cap by around 54%. Meaning the average dual-fuel household will be paying £1,971 a year to heat and light their home - a significant £693 more than it is right now. Homes using a pre-pay meter, which are typically the most vulnerable in society, will face an even larger price rise of £708, correlating to an annual bill of £2,017.
There was a time, only just a few short months ago, that you could easily and quickly save hundreds of pounds by switching your energy supplier. By doing so, the average household could save around £300 each, just two years ago. But those deals are gone now and for how long? No one quite knows, with not one cheap fixed rate tariff in sight.
“My quality of life will be affected a lot. It will mean that I won’t be going out as much as I won’t be able to afford to meet friends for coffee or take my granddaughter out and spoil her. I will also have to cut back on food and treats. Xmas will also be the worst ever.”
Why is there a price increase?
There are a number of reasons for this, most of which is to do with the Covid-19 pandemic. When everything started returning to normality after global lockdowns, suppliers were hit by a huge demand and, as a result, the prices on the wholesale market grew out of control.
Many of the smaller firms couldn’t bear these costs, due to customers being locked into fixed deals, meaning they were unable to balance the cost of buying with how much they were selling it for. In the end, around 30 energy providers collapsed under the strain.
“We are facing a historic shock (not seen since the 1970s) to our incomes” — THE BANK OF ENGLAND GOVERNOR STATED ON MONDAY, 28TH MARCH.
Sky’s Economics & Data Editor, Ed Conway, did a great job at analysing this in his recent article - saying that it may be ‘the worst we’ve seen since the 1950s’.
How will this continue to affect consumers?
There is still yet another shock on the horizon, with current predictions showing a potential further rise in the energy price cap in October by around 29%, according to Cornwall Insight. Although this is much lower than the original estimated figure of 50%, it will still add significant costs to already huge gas and electricity bills, potentially rising by a further £541 per year to £2,512 on average.
However, this is currently uncertain as we wait to see how various markets play out between now and then - the Ukraine conflict, Covid-19 pandemic and several other factors playing a significant part. One thing is certain, the UK public is already feeling the significant impact.
“The cost of rising energy prices will have a big effect on my life. I’m on esa benefit and cash is in short supply as it is. I lead a very meagre lifestyle. As I have no spare money or savings. All I can do is cut back on food and heating. Which will have an effect on my health as I’m disabled. My worry for the future is overwhelming causing my depression to be at an all time low. I feel the only way out of all this is being dead. Because there isn’t much to look forward to. The energy and fuel companies are making billions in profits. But us the worse off are getting poorer and poorer when will this all end”
What consumers are facing - Rare: Group conducted a poll of 500 UK consumers with responsibility for paying home energy bills between 29th & 30th March 2022. The results show a large-scale shift in mindset, level of worry and preparing for an historic squeeze on finances.
61% of bill payers say they are worried that they won’t be able to pay their energy bills soon. However, energy bills aren’t the only thing to be affected - many consumers have high levels of concern about paying other bills (53%) as well as 50% being worried that their quality of life will be reduced as a result.
These impacts are not just being felt by a small section of society - although those in vulnerable and low income households will be impacted to a larger degree. In fact 71% of consumers will (or already are) cut back on other expenses due to rising energy prices - a further 23% are uncertain yet, and just 6% expect not to have to cut back elsewhere.
“We are having to cut back on our food shopping treats, had to cut out having takeaways and we can’t afford to eat out, go out or have a holiday.”
We also research current levels of trust of government and energy suppliers - and what impact rising energy prices have had on those trust and reputation levels. And significantly, government bears a larger proportion of distrust due to this. 70% of consumers say they currently have low or very low levels of trust in the UK Government - and a further 69% stating that trust in the UK Government has worsened due to rising energy costs. This compares with 57% saying they currently have low or very low levels of trust in Energy providers - however a similar 69% say that trust here has worsened due to the impending higher bills.
Local Government and Ofgem in particular fare slightly better - with 56% and 51% respectively saying their level of trust in those organisations has worsened as a result of the energy price crisis.
Closing comment
Such uncertainty and worry means that many households are having to make difficult decisions on spending; and this is exacerbated by rising taxes, high inflation, rising food prices and astronomical rises at the fuel pump.
As a result (with consumers set to cut back on discretionary spending), we’re likely to see further pressures on the hospitality sector, travel, transport & tourism industries, motor trade, food & drink, and entertainment sectors.
This will have further, far reaching impacts on both the fiscal economic outlook and the quality of life of millions of people in the UK and further afield.
What simply cannot be overlooked is the impact on consumers across the entirety of the country -but especially in vulnerable and low income households. The devastating impact we expect to see here will have a lasting legacy for generations to come without prompt and useful intervention.
Both Energy providers and Government will have work to do to regain trust and build reputation and momentum in the years to come - and is something both should be taking steps to understand and build upon at this very moment.
