Consumer debt and reputation

Based on the official government economic forecaster, households will face a decreasing standard of living over the next two years as inflation is expected to rise above the expected salary increases.

As inflation rises, Bank of England interest rates will likely rise as well, causing ever-higher levels of debt and impoverished consumers.

In addition to increasing inflation rates, price comparison sites, such as uSwitch, warn that household energy bills could see a further increase as floor prices are put in place for carbon emissions. The government announced plans to raise £3.2bn by 2016 from a new carbon tax which will be funded by higher electricity bills. As the chancellor announced a floor price for carbon under Europe’s emissions trading scheme, electricity costs are calculated to rise by almost 10% by 2016, putting an estimate 110,000 more households into fuel poverty.

Indeed, this is terrible news for struggling consumers. Research commissioned by the BBC from the Institute for Fiscal Studies revealed that households are 6% worse off than they might have expected under “normal” circumstances of stable income rises and recession-free economy. Additionally, based on figures from MGM Advantage, UK households will need £33bn to maintain the same standard of living they were enjoying a year ago, equivalent to an additional £528.96 per person based on a UK population of 61,792,000. In contrast to this, based on Redpoint’s calculations, UK nuclear reactors mostly owned by EDF will enjoy up to £1.3bn of profits by 2020.

This article was written by Nicholas Chrysanthou, energy consultant analyst at Alva and released in full on Energy Business Review.