COMMENT
Brace for impact David Wylie, Commercial Director of LendingMetrics, looks at how high-and- rising energy costs plus retail price inflation is going to impact borrowers.
We are in for what is shaping up to be a tumultuous second half of 2022. Things were already getting heated at the beginning of the year, when the tailing off of the pandemic was fol- lowed swiftly by rises in inflation and higher interest rates as the economy seemed to bounce back. Then another ‘black swan’ event came into view, as Russian tanks massed on the Ukrainian border in March. As a result, the large hike in inflation that
the most pessimistic pundits thought might, possibly, occur towards the end of 2022 arrived early, and the cost of living has been going through the roof as we have been caught in a pincer movement of rocketing energy bills and rising retail prices. I find the need to repeat the figures to fully digest the enormity of the hikes that are coming down the track. The larger of the two hits to income is obvi- ously going to come from fuel.
The average annual dual fuel bill is esti- mated to be, staggeringly, £2,800 a year when the new price cap comes into effect in October. Bear in mind that the price cap in April meant average annual dual fuel bills of £1,971 and, as recent - ly as last October, that figure was just £1,277. In effect, average energy bills will have risen by just under £1,000 in the space of a year. On top of this, of course, consumers will have to contend with retail price rises that are going to have a similarly large impact on their wallets. The UK’s Retail Price Index is now running 11 per cent ahead of where it was this time last year (334.6 as compared to 301.1), meaning that the weekly shop and other staples are going to make a big dent on disposable incomes. The Bank of England might be predict- ing that inflation will peak and start to come down some time in late 2023, but it goes without saying that in the mean- time wages are not going to keep up with this level of inflation.
14 | Metrics Monthly
Q2 | 2022
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