UK households face biggest energy bill rise in four years, forecast says

UK households face biggest energy bill rise in four years, forecast says

A typical UK household will pay an estimated £1,999 for gas and electricity in 2026, according to a forecast released by the Department for Business, Energy and Industrial Strategy (BEIS) on Monday. The figure represents the highest projected annual cost in four years, a jump that comes on top of a sustained rise in wholesale energy prices.

BEIS noted that the average bill grew by 5.6% between 2024 and 2025, and the new projection suggests a further increase of roughly 6% this year. The forecast is based on the latest wholesale gas price trend and the inflation rate in the energy sector, which the department said remains above the Bank of England’s 2% target.

Drivers behind the surge

Wholesale gas prices have been volatile, with the average price per megawatt hour rising from £48 in early 2025 to over £55 this month. The rise is attributed to reduced supply from the North Sea, increased demand from the heating sector, and supply chain disruptions that have slowed the deployment of new infrastructure.

Electricity prices have also climbed, partly due to higher wholesale gas costs feeding into the power generation market. The forecast shows electricity bill inflation at 4.8%, while gas bill inflation sits at 7.9% for the year.

Government measures and consumer response

The government has said it will continue to monitor the energy price cap set by Ofgem, which is currently £1,200 per year for a typical 12‑kW household. Some analysts argue that the cap may need to be increased to reflect the new wholesale price trajectory. The Energy Saving Trust has called for a temporary subsidy to cushion the impact on low‑income families.

Consumer groups have urged the Treasury to consider a temporary extension of the Energy Company Obligation, which requires providers to fund energy efficiency improvements for the most vulnerable. A spokesperson for the Association of Energy Companies said that any policy changes would need to balance affordability with the sector’s investment needs.

Implications for the wider economy

Higher energy costs are expected to reduce discretionary spending, as households cut back on non‑essential goods. The Office for Budget Responsibility has warned that the rise could push inflation closer to 4% by mid‑2026, tightening the fiscal outlook for the government.

Economists note that the energy price shock could widen the gap between high‑income and low‑income households, potentially increasing demand for social housing and support programmes. The forecast also suggests that businesses may face higher operating costs, which could ripple through the supply chain and affect price levels in other sectors.

BEIS will review the forecast quarterly, and the next update is due in early 2027. Households and businesses alike will need to plan for the increased cost of heating and powering their homes and premises in the coming months.