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Energy price rises set to hit UK economic growth as businesses urge swift action to protect consumers

© Chris Barker

LONDON (WNI) — Britain’s leading business groups have urged swift government action in the face of substantial energy price rises.

With the UK’s inflation already at a 30-year high, the anticipation of increased energy bills in the coming months could lead to a profound shock to the economy.

The UK’s five leading business groups including the British Chambers of Commerce and the CBI issued a letter to Chancellor Rishi Sunak this week urging support for consumers as high cost bills could lead to more inflation and dent economic recovery.

High energy costs particularly in the wholesale energy market have caused major disruption in the sector with a number of UK energy suppliers already folding in the past several months.

With the potential of a full blown energy crisis in the mid-term, risks of wholesale gas prices rising, and a shortfall in energy production, Britain’s low income households could be worse affected.

Prices are set to rise by up to 50% for some consumers when price caps are removed in April. With high inflation, and rising energy costs, millions of households could be at risk of entering ‘fuel poverty’ and having to make drastic decisions on whether to heat their homes or buy food.

Following the impact of the pandemic, household budgets have been squeezed as inflationary pressures on a wide range of industries increase prices for consumers. From restaurants to hospitality, supply chain pressures and shortages have led to higher business operating costs, which has led to price increases for goods and services. This continued price pressure could begin to erode demand, affecting economic activity in the next half of 2022 particularly if energy bill price increases become unsustainable.

The Chancellor’s next statement in March is expected to reveal a potential support package to counter skyrocketing costs for consumers and businesses ahead of the price cap removal.