New forecasts predict how much energy bills could rise in 2027

UK energy regulators and independent forecasters warn that household bills may climb by more than £400 in 2027, driven by Middle East conflict and rising fuel costs. The Ofgem price cap could hit £1,723, while EDF and Bloomberg estimate up to £2,165. These hikes threaten to push inflation above 4%…

Thu, 17 Sep 2026 06:55:08 GMT

In a stark warning to households across Britain, energy experts predict that the average domestic energy bill could rise by more than £400 in 2027. The forecast comes as global oil markets remain volatile, with renewed tensions in the Middle East putting fresh pressure on fuel prices.

What the Forecasts Say

Ofgem, the regulator that sets the energy price cap, has announced that the cap will increase to £1,723 from October 2027, a rise of £60 or 4% from the current level. However, independent forecasts suggest that the real cost could be far higher. EDF Energy, a French‑owned provider and one of the UK’s largest suppliers, projects a 30% jump to £2,165 for the January‑March period. Bloomberg Economics, in a separate analysis, estimates a 25% increase to £2,150 for the same window. Both figures would push the average bill to its highest level since June 2023.

These numbers are not just academic. They translate into an extra £36 a month for the typical household, a figure that could erode the modest savings achieved by recent government interventions.

Why the Middle East Matters

The root of the price surge lies in the ongoing conflict in the Middle East. Ceasefire talks between the United States and Iran collapsed in July, leading to a potential blockade of the Strait of Hormuz – a critical artery for global oil shipments. Since the conflict began in February, oil prices have spiked, and the ripple effect has been felt across the UK’s energy market.

Energy consultancy Cornwall Insight had already predicted a £149 increase to £1,872 for January’s cap in August, but wholesale prices have since surged beyond that estimate. The regulator’s methodology for calculating the cap is regularly updated to reflect changing consumption patterns, meaning that the headline figure is a moving target.

Government Response and Economic Impact

The government has taken steps to cushion the blow. Chancellor John Healey announced a temporary VAT cut on energy bills, saving the average household £45 a year from October. Earlier, former Chancellor Rachel Reeves proposed scrapping two energy‑efficiency schemes to cut £150 from the average bill in 2025. These measures, however, could be offset by a £200 rise in January, effectively nullifying the savings.

Beyond the household, the projected increase could push headline inflation over 4%. The Consumer Price Index (CPI) rose to 3.1% in August, largely driven by fuel costs. With inflation hovering near the government’s target, any further rise in energy prices could strain public finances and consumer confidence.

Looking Ahead: The 2027 Budget

Chancellor Healey is set to unveil his first budget as chancellor at the end of October. Analysts expect the budget to address the looming energy cost surge, possibly through additional relief measures or policy adjustments. A government spokesperson highlighted that the Chancellor is focused on easing cost pressures, citing the removal of VAT from electricity bills and a 25% reduction in electricity costs for over 10,000 manufacturing businesses under the British Industrial Competitiveness Scheme.

Until the budget is released, households and businesses will have to navigate a landscape of rising costs and uncertain relief. The energy market remains a key lever for the UK’s broader economic stability.

Key Takeaways

• Ofgem’s 2027 price cap is set at £1,723, but independent forecasts suggest bills could reach £2,165.
• Middle East conflict and potential Strait of Hormuz blockade are driving fuel price spikes.
• Government relief measures, such as VAT cuts, may be offset by the projected cost rise.
• Inflation could exceed 4% if energy prices continue to climb.
• Chancellor Healey’s upcoming budget will likely address these challenges.

FAQs

What is the energy price cap? The cap is the maximum amount suppliers can charge for each unit of energy to customers on a standard variable tariff. It is expressed as an annual bill for the average home.

How does the cap affect my bill? The cap sets a ceiling on the price per unit of energy, which translates into a maximum annual bill for the average household. Suppliers cannot charge more than this amount.

Will the government introduce new relief measures? The upcoming budget is expected to address energy cost concerns, but specific measures have not yet been announced.

Why it matters

Energy costs directly affect household budgets and overall inflation. Understanding the projected rise helps consumers plan and policymakers craft timely relief measures.

Key points

• Ofgem’s 2027 cap set at £1,723; independent forecasts up to £2,165
• Middle East tensions driving fuel price spikes
• Government VAT cuts may be offset by rising bills
• Inflation risk above 4% if energy costs climb
• Upcoming budget expected to address energy cost concerns

Frequently asked questions

What is the energy price cap?

The cap is the maximum amount suppliers can charge for each unit of energy to customers on a standard variable tariff, expressed as an annual bill for the average home.

How does the cap affect my bill?

The cap sets a ceiling on the price per unit of energy, which translates into a maximum annual bill for the average household.

Will the government introduce new relief measures?

The upcoming budget is expected to address energy cost concerns, but specific measures have not yet been announced.

Reporting drawn from

• independent.co.uk