"Financial time bomb": Britain faces double energy price shock in winter

A number of British energy suppliers file for bankruptcy due to high wholesale prices.

"Financial time bomb": Britain faces double energy price shock in winter

A number of British energy suppliers file for bankruptcy due to high wholesale prices. In order to prevent further bankruptcies, the British regulatory authority is adjusting the price cap for energy costs. According to experts, many consumers are at risk of slipping into poverty.

Consumers in Great Britain face massively rising costs due to the energy crisis in winter. Forecasting institute Cornwall Insight has calculated that the government price cap on the average annual energy bill is likely to rise to more than £4,266 in January. This corresponds to 5052 euros and would be an increase of 230 percent compared to the same month last year. The price cap is currently £1,971.

The numbers are significantly higher than previous forecasts. The reason for the price explosion are the rising prices for gas and electricity, which are being pushed up by the Ukraine war. At the same time, the British regulatory authority Ofgem wants to use its pricing to prevent other energy suppliers in the country from going bankrupt, which would put an even greater burden on consumers. The aim is to get them through the crisis so that energy prices fall again in the second half of 2023.

According to the Cornwall Insight institute, the rise in prices will hit consumers in two waves. The first is therefore expected in October, with an increase in the price cap based on rising wholesale prices by an expected 82 percent to £3,582. The second would come to the British in January 2023 and would raise the capped average price for gas and electricity to £4,266.

A number of British energy suppliers have had to give up since the middle of last year because they could no longer survive with record high wholesale prices and capped customer bills. The state-regulated upper limit is intended to limit the rising prices for consumers. The government has so far announced relief of £400 (around €474) per household. Many experts agree that this will not be enough to keep people from sliding into poverty.

Former Labor Prime Minister Gordon Brown warned of a "financial time bomb" and called for an emergency budget. Business associations are also calling on the two candidates to succeed outgoing British Prime Minister Boris Johnson to prepare emergency measures now. The two remaining contenders for the post - Foreign Minister Liz Truss and ex-Finance Minister Rishi Sunak - promise relief either through tax cuts or direct help with paying utility bills.

The new government is scheduled to take office in early September. Johnson himself does not want to make any more essential decisions in the next few weeks. Since he was last on his honeymoon while the Bank of England announced its dramatic economic forecasts, the opposition speaks of a "zombie government". The central bank fears that the British economy will slide into a deep recession and that the inflation rate will rise to 13 percent.

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