Energy price hike prompts £4.7bn debt crisis

2nd March 2022

The UK’s energy crisis has prompted one in five (20%) consumers to rely on credit cards, loans and overdrafts to manage the mounting costs recorded over the last three months according to research by Credit Karma.

The research found that the vast majority of consumers (78%) say they have experienced price hikes since the beginning of the year, leading households to rack up £4.7 billion in debts.

Since the beginning of 2021, consumers have experienced price rises of about 23% on average. Unable to avoid the rising costs, more than a quarter (26%) fear they can no longer afford their bills, despite consumption remaining consistent.

In an attempt to counter the rocketing price of energy, 40% have cut back on consumption, making do without heating or switching off electronics, while others have been forced to dip into their savings to make ends meet.

The desperation of the situation is real for many British households. According to the study, 25% of consumers say the rising costs of energy and gas, paired with reduced incomes, have priced them out of necessities.4 For some, the situation is so dire that they’ve had to move in with relatives or share their homes with more people to share the cost of bills. Others have even had to take on additional work to get by.

However, the issue of rising energy prices is far from over. This could result in a debt crisis for consumers, as the vast majority (79%) of those who have borrowed money to counter the rising cost of bills fear they won’t be able to meet repayments.

Akansha Nath, Head of Partnerships at Credit Karma said “Right now, high wholesale costs are preventing energy providers from offering competitive tariffs, limiting consumer choice and removing the incentive to switch. As a result, turning to credit to make ends meet has become essential for many. While much of this is outside of customers’ control, there are things they can do to ease their financial stress.”