Alarming number of people have nothing left to cut back on next time bills go up
More than one in eight people in the UK say their budgets are stretched too thin to cope with further energy bill hikes expected this year.
Almost 70% of people are already making cutbacks as inflation creeps towards 10%, according to a survey by pensions giant Legal & General.
Utility bills are expected to rise by £693 per year on average following the rise in the energy price cap in April, while car fuelling costs have hit record highs.
But the cap increase is expected to bite hardest as heating needs go up over the colder months.
A second review of the price cap later this year could see another ‘significant increase’ in bills, economists say.
Legal & General asked 20,000 how they plan to deal with their soaring bills for its Rebuilding Britain Index, a measure of how Britain’s economy is recovering from the pandemic updated every three months.
A total of 13% chose the most pessimistic answer: ‘We won’t be able to cope – there is nothing left for us to cut back on.’
Another 28% said they will only be able to cope if they make ‘significant cutbacks’, while just 19% said they won’t have to make any cutbacks at all.
The proportion of people who fear they won’t be able to cope rose to 28% among those earning less than £20,000 a year.
More than a third of people in the same age bracket said they can only cope by making significant cutbacks.
Overall, nearly half of those surveyed said they face falling behind on rent or mortgage payments over the next year.
The government has begun dishing out a £15 billion support package including a one-off ‘cost of living payment’ of £650 to households who receive universal credit and £400 to other households.
Nigel Wilson, Legal & General’s chief executive, welcomed the support but said a major ‘rethink’ is needed to address the ‘underlying inequalities that are fuelling the current crisis’.
Mr Wilson added: ‘What is most concerning is that the impact of the cost of living crisis is being felt more severely in some parts of the UK than in others.
‘This threatens to widen the existing demographic and geographic inequalities that the Government’s levelling-up agenda was designed to address.’
His report found ‘wide disparities’ among regions in the Rebuilding Britain Index, which accounts for differences around the country wages, employment rates, rent, mortgage payments and other factors.
Wales and the North-East of England scored the lowest on the Index, while London scored highest – although research on the capital indicated that ‘disparities between the best and worst performing boroughs are widening’.
The Bank of England has signalled it could raise interest rates by half a percentage point this week amid concerns inflation could hit 12% this autumn, although expectations of next year’s price rises have fallen.
The bank believes inflation will fall next year and sink back to 2% the following year but has vowed to act decisively to stop rising prices becoming ‘entrenched’.
Wage growth has increased recently but this is mostly due to employers offering one-off bonuses to attract or retain staff.
Get in touch with our news team by emailing us at webnews@metro.co.uk.
For more stories like this, check our news page.