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Energy bills will eat up one sixth of salaries

·2-min read
Energy Gas Electricity Bills Inflation Cost of Living Crisis
Energy Gas Electricity Bills Inflation Cost of Living Crisis

Energy bills will eat up one sixth of the average person’s pay when the price cap is raised in January.

The average monthly pay is now £2,272, not including bonuses, according to the Office For National Statistics. In January, the energy price cap is forecast to rise to £4,266 a year, or £355.50 a month, analyst Cornwall Insight found.

This means that 16pc of the average monthly pay will go on energy bills.

It comes as the value of pay packets has fallen by 3pc in real terms, the steepest drop since records began in 2001. While the average salary increased by 4.7pc in the quarter compared with the same period of 2021, inflation hit a four-decade high of 9.4pc in June.

However, the cost for households is likely to be lower overall, because most homes have more than one person in work. Official figures show that 59.1pc of households had all members in employment between January and March 2022, while 27.4pc had one person in work and one unemployed.

Debapratim De, of consultancy Deloitte, said the proportion of pay that is spent on energy was likely to be higher for those on lower incomes, whose wages have not risen substantially in years. “Energy could cost lower income families a quarter of their income after housing costs,” he said.

Janet Mui, of wealth manager Brewin Dolphin, said that wage growth would likely come under pressure with a weakening economy, reducing workers’ bargaining power.

She added: “European wholesale natural gas and power prices are still surging which are bolstered by the heatwave and dry weather.

“Ofgem will adjust its price cap every quarter from 2023 so any gyrations in energy prices will be felt more frequently by the average consumer.

“Businesses are in an even more dire situation as their energy bills are not protected by any cap. Ultimately, those higher bills will either be passed on to consumers or absorbed as a reduction to profits.

“Although international energy prices are out of the control of the government, it is an extremely critical matter that needs to be addressed urgently.”