Energy price hikes add to worries about the rising cost of living

With all Big Six energy providers announcing rises to their standard variable tariffs in the past two weeks, UK consumers are expected to shell out an additional £1.3 billion this year just to keep their houses running. That equates to an average household increase of over £100, with the utility companies using the fact that the cap for pre-payment meter customers is rising by 10.3% to £1,242 in April as an excuse to increase their variable rates by the same amount.

The hikes come just as Sky has followed the lead of Virgin Media by raising the cost of its television, broadband and phone tariffs, while EE, Three Mobile, Virgin Mobile and Vodafone have all said that some of their mobile charges will go up in the coming months.

On top of that, the British Retail Consortium has warned that if the UK leaves the EU without a deal on March 29 tariffs of 40% or more could be applied to a range of foodstuffs, putting household spending under even greater strain.

No wonder insolvency trade body R3 and market research agency ComRes have found that one in five Scottish adults would not currently be able to pay an unexpected bill of just £20 “without assistance from an external source”.

Noting that “years of non-existent real wage growth” have also taken their toll on people’s savings, the organisations’ research found that 40% of Scottish adults would be unable to pay an unexpected £100 bill - for a new washing machine motor, say - while just a third say they would have the means to pay an unplanned-for expense of £500.

Addleshaw Goddard partner Tim Cooper, who chairs R3 in Scotland, called the results of the research “alarming”, noting that they “suggest household budgets are operating on very tight margins”.

“Lots of people are one unexpected bill away from losing financial stability,” he said. “A missed payment for a relatively small amount can be the trigger for an escalation in debt that soon becomes impossible to juggle.”

While many are turning to debt just to make ends meet, Roger Gewolb of FairMoney, a price comparison website aimed specifically at people who struggle to borrow money from mainstream providers, said that consumers are being further hit by a reduction in the number of long duration interest-free credit card offers on the market.

“We are in a whirlwind of debt and consumers are juggling their debts onto credit cards. This can be a dangerous game to play and with such a poor choice on offer and extortionate interest-rates, it is easy to get burnt,” he said.

“With such pressure, it’s not surprising that consumers turn to payday lenders to battle the financial burden. Payday loan providers have their place in society for cash-strapped Brits, but most people have been abandoned by poor lending practices that stem from the financial crash of 2008. We’re over a decade on – things need to have changed. It is time for consumers to take their personal finances into their own hands.”

One means of doing this, Mr Gewolb believes, is for those with debts to consolidate them into a single loan rather than trying to chase the next 0% credit card transfer deal on the market.

When it comes to broadband or utility bills, meanwhile, the best way for anyone to try to cut their bills is to switch to a new provider - providing they are not locked into a contract and no other exit charges apply.

Many are already doing that, as Peter Earl of price comparison site Compare the Market pointed out.

“Those households who thought Ofgem’s introduction of the [energy] price cap in January meant they were protected from price rises, will now potentially feel sadly let down,” he said. “Our data shows that over the last month, the Big Six lost more customers than it gained, as households voted with their feet and sought out more competitive deals. Even with the price cap in place, 90% of fixed tariffs deals on the market are cheaper than the price cap level. Simply by changing to a different energy provider, households could save hundreds of pounds.”