Domestic energy arrears in Great Britain have climbed to record levels, with the trade association Energy UK forecasting that unpaid bills could reach £7bn by the close of the year. The figure represents an acceleration from the current £6bn in outstanding debt, driven by anticipated increases in the government’s energy price cap and sustained pressure on household finances from elevated gas and electricity costs.
The energy regulator is expected to confirm a 4% increase to the price cap effective from October. Energy UK’s chief executive indicated that this rise will substantially offset the government’s planned reduction of VAT on household electricity bills, which is intended to provide households approximately £45 in annual savings. The combination of these measures leaves households facing continued financial pressure, with forecasters at Cornwall Insight projecting typical annual bills at approximately £1,729 under the new cap, based on assumed household consumption patterns. Using previous calculation methods, the cap would reach higher levels not seen since summer 2023.
Several factors are contributing to the projected price increases. Rising costs for sourcing gas on global wholesale markets represent the largest single driver, while expenses associated with upgrading Great Britain’s energy infrastructure are also playing an expanding role in determining retail energy prices. The broader economic context shows that high energy costs have prompted many households to reduce consumption, a factor incorporated into current price cap estimates.
Energy UK has called on the government to implement more comprehensive and permanent solutions to energy affordability challenges, including a proposed social discount tariff that would target support to vulnerable households. The trade group’s debt estimates exceed official figures reported by Ofgem, which only count bills unpaid beyond 90 days. The higher estimates, when spread across all consumers, currently add approximately £50 annually to typical bills.
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