If U.K. energy prices continue to skyrocket on their current trajectory upward, global analysts warn Britain’s inflation could top 22% in 2023. This could impact millions of private sector pensioners due to annual increases being capped well below the double-digit inflation rates.
U.S. investment bank Goldman Sachs predicts inflation could peak at 22.4% and gross domestic product could drop by 3.4% if energy costs keep rising at their current pace. Meanwhile, The Bank of England is warning British households that the energy price cap will soar as much as 80% in the fall which would spike the average annual household energy bill to £3,549 (up from the current £1,971) beginning October 1. Britain’s energy regulator, Ofgem, announced the new price cap is due to rising wholesale gas prices, which have surged 145% in the U.K. since early July.
Approximately 4.5 million private sector pensioners are expected to be heavily impacted due to annual increases being capped at a maximum of five percent each year, which is well below the expected double-digit inflation rates. That means the average 66-year-old pensioner will miss out on £1,200 per year over the next two years and £25,000 over a lifetime.
Although some slight relief is expected with the government promising £400 off energy bills for all, the second installment of a £650 payment for vulnerable households, and £300 for all pensioners, Goldman also warned that the U.K.’s deepening cost-of-living crisis will likely cause it to fall into a recession in the fourth quarter of this year.
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