Household energy debt ‘to hit £6bn’ as payments fall behind

UK household energy debt is on track to reach £6 billion by 2026, according to new analysis from energy consultancy Baringa. The firm warns that one in four households will be unable to cover gas and electricity bills next year as arrears climb sharply.

Energy debt has risen from £2bn in 2021 to £4.4bn this summer, and Baringa’s latest projections suggest continued price pressures will push debts close to £6bn.

Baringa estimates that 6.9 million households will be financially vulnerable this winter, including 2.3 million in extreme hardship. The UK’s high energy costs continue to compound the issue: average bills have climbed from £1,179 to £1,755 since 2019.

Although the 2022 gas price spike triggered the initial surge in bills, Baringa highlights that prices are now being kept high by around a dozen levies and policy costs, funding renewables and other schemes, which make up nearly two-thirds of a typical bill.

The growing crisis is piling pressure on Chancellor Rachel Reeves ahead of the 26 November Budget, with calls to reconsider net-zero levies and other non-energy charges. Reeves has floated options such as cutting the 5% VAT on gas and electricity and scaling back heat pump and insulation funding.

Energy suppliers are also feeling the strain. Rising customer debt is squeezing cashflow, prompting warnings of broader instability after the recent collapse of Tomato Energy and cost-cutting measures at OVO, the UK’s fourth-largest supplier.

Energy UK, the suppliers’ trade body, says average customer arrears now exceed £2,000, creating both financial and operational challenges. Suppliers fear that unpaid bills may eventually be redistributed to paying customers, fuelling backlash.

EDF’s Josh Buckland has warned that without government action, bills will not fall and projects bills will be 12% higher in 2030 than today and 54% above 2021 levels.

Baringa reports that the impact of rising debt will fall heaviest on low-income households, including single parents and young families. Forecasts indicating a further £100 increase in bills in April 2026 on top of last month’s £35 rise.

If you’re worried about rising bills or want simple ways to prepare your home for colder weather, you can find clear, practical guidance here.