UK energy bills rise ahead of October Budget

That would wipe out much of the relief from the government’s plan to remove VAT from domestic electricity bills, a move expected to save households around £45 a year. Energy costs have stayed under pressure as wholesale prices rise on continuing tensions in the Middle East, and officials are now looking at whether support could be extended or targeted more broadly if the squeeze worsens.

The political stakes are rising because the Treasury has already committed to help for some households through the Warm Home Discount, which gives £150 off bills to nearly six million people on means-tested benefits. Any new intervention would add to fiscal pressure on Chancellor John Healey, who is preparing a Budget in which every bit of room is constrained by weak growth, sticky prices and competing demands for spending.

Markets are also watching because the energy shock is not just a household story. Bank of England deputy governor Clare Lombardelli has warned that persistent higher energy prices can feed into inflation expectations, wage bargaining and price-setting, raising the risk that rates stay higher for longer.

That has implications for UK consumer stocks, utilities and rate-sensitive assets as investors assess how much of the winter bill shock gets passed through to inflation and how much gets offset by government support. For households, the key catalyst is the October Budget; for investors, the next read-through is whether higher energy bills keep inflation sticky enough to delay policy easing.