Domestic energy debt in Great Britain has reached concerning levels, with industry analysts projecting it could climb to £7bn by the end of the year. Currently sitting at £6bn as of late June, energy arrears have grown by approximately £500m over the past twelve months, driven largely by elevated gas and electricity prices stemming from Middle East tensions affecting global markets.
The rise in energy debt is expected to accelerate following a 4% increase to the energy price cap scheduled for October. According to forecasting firm Cornwall Insight, this adjustment will bring typical household annual bills to approximately £1,729 under the price cap methodology, with electricity rates rising from 26.11p to 26.57p per kilowatt hour and gas charges increasing from 7.33p to 7.90p for direct debit customers. Under previous calculation methods, the cap would reach its highest level since summer 2023.
Trade association Energy UK has highlighted that wholesale gas costs represent the primary driver of rising bills, alongside increasing expenses for upgrading Great Britain’s energy infrastructure. The regulator is expected to formally announce the price cap adjustment later this week. The government’s recent decision to cut VAT on electricity bills from October is anticipated to provide only modest relief, offering households approximately £45 in annual savings that will be substantially offset by the price cap increase.
Energy UK has called for more comprehensive policy solutions, advocating for a permanent social discount tariff rather than temporary relief measures. The group’s debt estimates are notably higher than official Ofgem figures, which count only bills unpaid for 90 days or longer. The cost of unpaid bills is currently distributed across all consumers, adding approximately £50 annually or 3% to typical bills. Energy consumption patterns have shifted downward as households reduce usage in response to rising costs, affecting how price cap calculations are conducted.
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