Forecast energy price cap rise in Britain could push UK fuel bills up 4% this winter
Forecast quarterly rise highest in three years and likely to wipe out Burnham’s VAT cut on electricity bills Household energy bills across Great Britain are expected to climb to a three-year high this winter as the impact of the Middle East war wipes out Andy Burnham’s tax cut on electricity bills. The government’s cap on energy prices is on track to rise by 4% from this October to the equivalent…
Household energy costs in Britain are anticipated to reach a three-year peak this winter due to the repercussions of the Middle East conflict, potentially erasing the VAT reduction on electricity bills announced by the government. Cornwall Insight, an energy consultancy, predicts the government's energy price cap will increase by 4% from October 2025 to approximately £1,729 annually through the final quarter of 2026.
This projected rise could disproportionately affect vulnerable households during the upcoming winter. The forecasted quarterly price cap would mark the highest since July 2023, driven by soaring energy market prices stemming from the Middle East and the increased utilization of costly gas in power plants during European heatwaves.
Craig Lowrey, principal consultant at Cornwall Insight, emphasized that energy bills remain interconnected with global events, underscoring the need to diminish Britain's dependence on volatile international gas. The regulator establishes the maximum price per unit of gas and electricity based on the cost of providing energy to homes, incorporating average wholesale market expenses in the months preceding each new cap.
Cornwall Insight estimates that electricity rates will climb from 26.11p per kilowatt-hour to 26.57p, while gas charges will surge from 7.33p to 7.90p for households paying by direct debit. This increase translates to an annual dual-fuel bill of £1,729 for the typical UK household, according to the energy regulator's latest projections, which assume reduced energy consumption.
Under the earlier methodology, the price cap would have escalated to £1,940.69 from October, a figure Cornwall Insight forecasts will surpass by January 2026, contingent on ongoing market conditions. The consultancy anticipates a potential further rise in energy bills in January, depending on the evolving situation in the Middle East.
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit, expressed concern over the latest hike, likening it to the initial gas crisis following Russia's invasion of Ukraine. Ralston highlighted that wholesale gas prices have reached a near four-year high, which could result in additional bill increases for future months.
She also pointed out the UK's reliance on gas for home heating, noting that while the adoption of electric heat pumps is increasing, the nation still lags behind European counterparts in reducing gas dependency.
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