Cost of living crisis hits UK, about to get worse

People across Britain will face difficult choices to warm their homes in the coming months with energy costs for millions of households in the UK surging by a whopping 54 percent, effective April 1.

It is the second major hike in energy bills since last October, and a third increase might be in store as rebounding demand from the COVID-19 pandemic and the persisting Ukraine conflict push prices for oil and natural gas higher in the United Kingdom, local press reports said Friday.

According to the reports, energy costs are the prime driver of soaring consumer prices in Britain because the country is more exposed to rising natural gas prices than even its gas-reliant European neighbors, where utility bills and other costs have also surged.

This is while prices for natural gas, which is used for electricity and heating, have more than doubled in the past year.

British economists warn of the biggest drop in living standards since the mid-1950s, fueled by skyrocketing energy costs, food prices and preplanned tax hikes. Additionally, disposable household incomes — adjusted for inflation — are expected to fall by an average 2.2 percent this year, according to the Office for Budget Responsibility.

Those figures obscure the impact on low-income people disproportionately affected by the crisis, since they spend a larger percentage of their budgets on food and energy.

The poorest quarter of British households will see their actual incomes drop by six percent this year, according to the Joseph Rowntree Foundation, a think tank focused on improving living standards.

Moreover, Britons that rely on government benefits and state pensions are being doubly impacted because their annual cost-of-living adjustment was based on annual inflation figures through September – before consumer prices surged.

That means while benefits are set to climb by just 3.1 percent this year, inflation soared to a 30-year high of 6.2 percent in February and is expected to peak at eight percent this year as the Ukraine conflict sends food and energy prices ever higher, the Bank of England predicted.

Amid the rising costs, people are moving their beds near windows so they can read by the light of the streetlamps outside, said outreach workers at Christians Against Poverty, which offers counseling for those in debt.

Divorced fathers, according to the agency, skip meals so they can afford to buy food for their children when they visit, and an increasing number of people report that the financial pressures make them contemplate suicide.

Energy prices for 22 million British households were set to rise Friday as an update of the national price cap kicks in. Regulators adjust it every six months.

Analysts expect a third consecutive jump in the cap later this year, which could leave consumers in the UK with utility bills that are more than double what they were a year earlier.

Meanwhile, Britain relies more heavily on natural gas to meet its energy needs than the European Union countries as it has less nuclear and renewable energy. The UK also has been slower than its neighbors in insulating and sealing the country’s aging housing stock, so it takes more energy to heat them.

Britain’s largest gas storage facility was also allowed to shut down five years ago, leaving the country with the capacity to store just 12 days of supply, compared with nearly 80 days in Germany, which is also heavily reliant on natural gas.

That means in time of crisis Britain would be more dependent on buying gas through “spot markets” that reflect short-term price swings.

Even so, some European governments have acted more aggressively than Britain in trying to limit costs. France forced a state-controlled utility to limit electricity price hikes to just four percent this year. Spain imposed a tax on energy producers’ windfall profits that will be passed on to consumers.

These are the people also hit hardest by the pandemic and recent cuts in government benefits, leaving them with little to fall back on in the new crisis, said Adam Scorer, chief executive of National Energy Action, a charity focused on fuel poverty.

“There’s no cutting back. There’s no smart decisions,” Scorer further explained. “You just don’t heat your home, and you don’t use your cooker, and you don’t heat water, and you don’t shower. You just don’t do those things because you can’t afford to do those things. There’s no choices for many people.”