According to Citigroup, the rising prices of energy bills mean that the UK is on the path to exceeding the 18.6 percent inflation rate for next year, the highest among the larger western economies. The bank’s forecast comes as UK gas rates for next-day delivery increased by as much as 33%, increasing pressure on Conservative leadership candidates to confront a growing cost of living crisis.
The rise in the price of natural gas has left economic projections out of date. While Goldman Sachs and EY predicted that UK consumer price inflation would reach 15%, Bank of America predicted it would peak at 14% in January. But Citi predicted on Monday that inflation would reach 18.6% in January as a result of the gas situation in Europe worsening in August.
Across Continental Europe, the price of gas is 14 times more than in the past decade. The benchmark European gas price increased by almost 10% on Monday to €278 per megawatt hour ($81 per million British thermal units), setting a new record for the price at the close and bringing the increase since August to 45%.
When examining the wholesale figures, Citi predicted that the UK’s retail energy price cap, which restricts how much households must spend for electricity and heating, will be lifted from its current level of £1,971 per year to £4,567 in January and then £5,816 in April.
As price increases have expanded throughout the economy, the rate of inflation has exceeded estimates in the majority of the months this year. According to the ONS, it was 10.1% in July, the highest percentage in more than 40 years and the highest among the G7 nations. The energy price cap for October to January will be announced by the energy regulator Ofgem on Friday. According to most estimates, it will be over £3,500 for a household using energy on average, a 75% increase from present levels.
A Downing spokesperson urged people not to panic over energy supplies despite the concerns of the potential blackout in the coming months. She assured everyone that they would have access to the gas and electricity they required throughout the winter. This is because, in contrast to other nations in Europe, she said ‘‘we have access to our own North Sea gas reserves and have one of the most diverse and stable energy systems in the world.”