British households are facing renewed financial pressure as surging utility bills threaten to drive up headline inflation and spark a fresh cost-of-living squeeze.
Following Ofgem’s decision to lift the energy price cap by 13% for the summer quarter, gas and electricity costs have jumped significantly.
As reported by the Guardian, the upward pressure is heavily linked to ongoing volatility in global wholesale markets driven by geopolitical conflicts in the Middle East.
Economists forecast that the sharp increase in household energy bills will push the UK’s Consumer Prices Index (CPI) inflation rate up toward 2.9%, reversing previous downward trends and putting further strain on household budgets.
In a fresh squeeze on household budgets, the figures from the Office for National Statistics (ONS) due on Wednesday are forecast to show a jump from a rate of 2.6% in June.
It comes as the Bank of England considers raising interest rates from as early as September in response to fears over stubbornly high inflation becoming entrenched in the economy.
With inflation surging back up, the Bank of England faces mounting pressure to keep interest rates elevated or potentially raise them further to prevent persistent price growth from becoming entrenched in the economy.
The renewed economic strain places an immediate test on Prime Minister Andy Burnham’s government, which faces intense scrutiny to deliver effective relief measures ahead of the autumn budget.
The latest snapshot will also highlight the challenge facing Andy Burnham’s government to ease the financial pressure on households and businesses before a difficult autumn budget.
Economists said a rise in inflation as measured by the consumer prices index was likely after Ofgem, the energy regulator, lifted its cap on household gas and electricity bills by 13% in July.
“The cost of living squeeze is set to return to the headlines,” said Thomas Pugh, chief economist at the accountancy firm RSM UK, adding, “Higher inflation is adding fresh pressure to household budgets and complicating the outlook for interest rates.”
Britain’s economy has shown more resilience than initially feared, with official figures last week showing that it continued to grow in the first half of 2026 at the fastest pace in the G7. Inflation also fell by more than expected in June, to 2.6% – down from a peak of 3.8% last year.
As the stop-start Middle East war fuels volatility in the global oil price, countries around the world are facing renewed inflationary pressures and heightened uncertainty over the scale of the economic hit.
However, economists warn the impact from the conflict is likely to weigh more heavily in the second half of the year after the increase in the Ofgem energy price cap.
Burnham used his first week as prime minister to announce a raft of “breathing space” measures to ease the cost of living, including cutting VAT to reduce consumer electricity bills by an average of £45 a year from October.
With households under pressure from the renewed rise in energy costs, the Bank of England predicts UK inflation will reach 3.2% before the end of the year, despite government measures to limit the impact.
Separate figures on the UK jobs market due to be released on Tuesday are also expected to show a continued slowdown in wage growth.
