The Office for National Statistics has cited falling electricity and gas prices as having a major impact in the fall of inflation to 6.8%.
According to its research, the reduction in the cost of gas and electricity provided the largest downward contributions to the monthly change in Consumer Prices Index (CPI) including owner occupiers’ housing costs (CPIH) and CPI annual rates.
For the electricity market, the inflation rates reduced primarily due to Ofgem lowering the price cap in July 2023, which was set at £2,074 a year for a typical household. This was the first time the price cap had fallen in 18 months.
This showcases the impact the energy crisis has had on the UK economy in addition to the cost-of-living crisis. With prices now stabilising, though it’s worth noting it’s still significantly higher than pre-energy crisis levels, there appears to be more stabilisation and a return to ‘normal’ for the energy sector.
Ofgem CEO Jonathan Brearley highlighted this on the announcement of the price cap. He said: “We know people are still finding it hard, the cost-of-living crisis continues, and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.
“In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that the government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups. In particular, we will continue to work with the government to look at all options.”