UK household energy bills are forecast to jump sharply in January as natural gas supplies tighten following the Iran war. Consultancy Cornwall Insight expects the price cap to rise 16% to nearly £2,000, the steepest increase in four years, adding pressure on the government to step in with support.
Cornwall Insight forecasts the UK energy price cap will rise 16% in January to £1,999 a year for a typical household, up from £1,723 in the current quarter. The consultancy calls it the largest increase since January 2023, driven largely by the Iran war disrupting global gas supplies.
Iran war squeezes gas supply
Britain generates a substantial share of its electricity from gas and imports about half of the gas it needs, leaving it exposed to swings in global supply. On a per-unit basis, Cornwall Insight expects the January electricity price cap to rise to 30.28 pence per kilowatt-hour with a 55 pence daily standing charge, up from 26.32 pence and a 54.83 pence standing charge now. For gas, the cap is expected to move to 9.76 pence per kWh with a 31 pence standing charge, versus 7.97 pence and 29.68 pence currently.
Ofgem will set the actual January cap based on wholesale prices between August 19 and November 17, so the outlook could still shift. However, Cornwall Insight said that given price increases since September, a January increase is all but certain.
Pressure builds on the Treasury
The forecast increase adds pressure on chancellor John Healey to support households this winter. A row is reportedly brewing between the Treasury and the Department for Energy Security and Net Zero, with the department pushing for more universal support while the Treasury seeks to limit any programme to low-income households.
Prime Minister Andy Burnham has already announced a VAT cut on electricity bills taking effect Thursday, which will knock £45 off a typical bill, but said he would look to do more in January. He added that public finances remain tightly constrained ahead of the Budget on October 28.
The rise in gas and electricity bills comes as average diesel prices are set to breach £2 a litre in Britain for the first time, reflecting disruption in the Middle East and Russia along with threatened US export curbs.
Source: Financial Times
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