Household Energy Debt to Soon Reach Six Billion Pounds as UK Bills Soar

UK household energy debt is projected to reach £6 billion in 2026 according to new analysis from consultancy Baringa. Their study reveals a quarter of households will struggle to pay gas and electricity bills next year following a dramatic rise in family arrears and continuing price increases across the country.

Over the past three years, energy debt has swelled from £2 billion to £4.4 billion, with the acceleration of arrears driving forecasts upwards. As wholesale energy prices stabilised after the 2022 crisis, a significant portion of bill increases has been attributed to policy costs and levies designed to support renewable energy initiatives. These now comprise nearly two thirds of a standard UK energy bill. The trend is intensifying, with the Baringa report noting that 70 per cent of household energy debt remains unsecured and more than half is older than twelve months.

The consultancy estimates that 6.9 million UK households will face financial vulnerability this winter, with 2.3 million in extreme difficulty. Debt is expected to hit the poorest households hardest, most notably single parents and young families. As the debt mountain rises, pressure is mounting on the Government to intervene. Both Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves have voiced concerns, especially following a recent £35 increase in average annual household bills, ahead of a forecasted further rise of at least £100 next April.

Average annual bills have risen from £1,179 in autumn 2019 to £1,755 in 2025. Due to the current policy structure, major suppliers such as EDF predict no prospect of a substantial reduction in bills without significant government action. Projections indicate average bills will remain around 12 per cent higher in 2030 than today, leaving households paying 54 per cent more than pre-crisis levels. Ms Reeves has suggested potential cuts to VAT on power and gas and a reallocation of home energy scheme funding as possible strategies to relieve pressure.

Energy suppliers are also wrestling with soaring levels of unpaid bills. According to the industry body Energy UK, consumers in arrears now owe on average over £2,000 to their suppliers. This has forced companies to warn of lasting harm to their finances and the risk of additional costs being passed on to paying customers. Industry voices such as Octopus Energy have stressed the need for government and regulatory reform to make bills manageable and halt a mounting crisis.

Campaign groups like National Energy Action report that rising debt is causing significant distress for millions and is undermining household spending power, which is dampening wider economic activity. Ofgem, the market regulator, says it is working on debt relief schemes but acknowledges that the problem is serious and urgent. The Department for Energy Security and Net Zero has confirmed cooperation with Ofgem, seeking solutions that can begin to drive debt out of the energy system.