New UK cost of living crisis looms with soaring energy bills forecast to lift inflation
Latest reading on Wednesday likely to frame scale of challenge for new PM to ease pressures on households amid Iran war fallout British households are facing a renewed cost of living squeeze, with official figures expected to show this week that soaring energy bills drove up inflation in July to close to 3%. As the Iran war continues to send shock waves through global energy markets, economists…
Recent data is set to highlight the growing cost of living crisis facing British households as soaring energy bills are expected to push inflation to near 3%. The latest reading from the Office for National Statistics (ONS) is forecast to show a jump in inflation from 2.6% in June to 2.9% in July. This surge is attributed to the 13% increase in household gas and electricity bills by the energy regulator Ofgem.
Economists predict that the Bank of England may raise interest rates as early as September to combat high inflation. The rising inflation rate is expected to add to the financial pressures on households and businesses before the upcoming autumn budget. With global oil prices fluctuating due to the Middle East conflict, Britain's economy has shown resilience compared to other G7 nations, with growth continuing in the first half of 2026.
However, wage growth has slowed, and the Bank of England expects inflation to reach 3.2% by year-end. Prime Minister Andy Burnham has introduced measures to provide breathing space for households, such as reducing VAT and capping bus fares, with the aim of lowering inflation by 0.1 percentage point. The Bank of England remains cautious, with a worst-case scenario forecasting inflation to peak at 4.5% by mid-2027 if the Middle East situation escalates further.
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