The Bank of England warned last week that the UK will enter recession later this year. The expected recession is predicted to be the longest since the global financial crisis.
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A rising energy price cap and exorbitant rent prices are just two factors contributing to the UK’s deepening cost of living crisis, described by Legal and General CEO Nigel Wilson as “a tragedy for many of many people”.
People are “finding life really difficult with energy prices going up, food prices going up and a terrible backdrop for a lot of people as they try to pay their bills,” Wilson told CNBC’s “Squawk Box Europe” on Tuesday. .
His comments come as energy bills are forecast to top £4,200 ($5,088) a year from January, according to analysis by management consultancy Cornwall Insight. Meanwhile, rental prices have increased by 11% compared to last year, according to Zoopla, a UK property site.
Cornwall Insight predicts that the January rate cap will rise by over £650, leaving a typical household paying the equivalent of £4,266 every year for the first three months of 2023.
Forecasts for the October 2022 price cap have also increased, rising by more than £200 to give an average bill of £3,582 a year.
The price cap, which is set by regulator Ofgem, was £1,400 a year in October 2021.
“While our price cap forecasts have risen steadily since the summer 2022 cap was set in April, an increase of over £650 in January forecasts comes as a fresh shock,” said Craig Lowrey, principal consultant at Cornwall Insight.
“The cost of living crisis was already at the top of the news agenda as more and more people face fuel poverty, this will only exacerbate concerns,” he added.
A household is defined as fuel poor if it cannot afford to heat or cool the home to an adequate temperature.
‘A tsunami of fuel poverty’
Following the latest energy price cap forecasts, the End Fuel Poverty Coalition predicts that 9.2 million UK households (28.4%) will be in fuel poverty from 1 October, rising to 10.5 million (32.6%) from January 1.
“A tsunami of fuel poverty will hit the country this winter and these latest estimates further show that the level of support already promised by the government is just a drop in the ocean,” said Simon Francis, coordinator of the End Fuel Poverty Coalition. .
The ratings are also fueling Don’t Pay UK, a campaign encouraging people to cancel direct debits on their energy bills from October 1 unless the UK government acts to reduce costs “to an affordable level”.
More than 94,000 people have pledged to strike so far, according to the campaign’s website.
A high street decorated with piles of Union Jacks in Penistone, UK. The End Fuel Poverty Coalition has warned “a tsunami of fuel poverty will hit the country this winter”.
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A UK government spokesman called the move “highly irresponsible”. Possible consequences of not paying your energy bills on time include the installation of a prepayment meter by a supplier in your home and disconnection of supply.
Prime Minister Boris Johnson has no short-term plans to act on the cost of living crisis, saying it is up to his successor to make those decisions, according to a spokesman.
This puts further pressure on Conservative Party leadership candidates Rishi Sunak and Liz Truss to reveal their plans to tackle the worsening crisis.
Truss, the front-runner to be Britain’s next prime minister, told the Financial Times that she planned to cut taxes rather than offer cash.
Sunak said via Twitter on Tuesday that “there was no doubt [his] note that more support will be needed” and that he will act “as soon as we know how much the bills will increase”.
The Bank of England warned last week that the UK would enter its longest recession since the global financial crisis after it launched its biggest interest rate hike in 27 years.
Rising rental prices
Meanwhile, UK rental prices rose 11% in May compared to a year earlier, according to Zoopla, with London rental prices up 15.7%.
Prices are being driven by strong demand, particularly in city centres, but rising prices will start to put a cap on further rent increases, according to the property site.
Independent legal organization Citizens Advice revealed in March that one in five tenants expected their rent to rise in 2022 and that one in six tenants were worried about being able to pay their rent in the coming months.
