Soaring global gas prices – combined with a perfect storm of domestic factors – are fuelling a costs-of-living crisis in the UK and could have economy-wide implications. Energy bills are set to rise to £2,000 per year from April in a price hike which is untenable for most households, and a disaster for those already in fuel poverty. The response must prioritise emergency support for vulnerable households. We must also start now towards building a greener, fairer and resilient system as the only long-term solution for preventing future crises.
This briefing unpacks how the UK’s exposure to volatile gas markets is fuelling a costs-of-living crisis; exacerbated by a toxic mix of additional pressures including energy supplier failures, rising living costs and longstanding underinvestment in green homes. It sets out near-term actions to protect households from sharp price increases, and longer-term priorities to rebuild for resilience.
The costs associated with inaction could be high and economy-wide – with a one percentage point rise in inflation leading to considerably more than £10bn a year in government costs. Goldman Sachs predicts that rising fuel bills could push inflation up by around two percentages points. Meanwhile, there are economic benefits to be gained through measures to cut energy bills and support green industries.
