Energy crisis in the UK: Save money and plan ahead

Posted on: 29th September 2021 in Financial Planning

The energy crisis in the UK is the main media outlet topic as one after the other energy firms go bust. Many UK citizens worry that the winter will be hard as the cost of heating is expected to surge, pushing inflation higher. In this blog, you will read what led to the so-called energy crisis, some basic tips on how to reduce your energy bills and how a solid financial plan can minimise the effect of the problem on your household.

Energy crisis: how it happened

Some characterised the energy crisis in the UK as “the perfect storm.” Several factors have contributed to creating an unfortunate situation that puts a strain on the budget of citizens and threatens the majority of UK industries.

The coronavirus pandemic has played a significant role as fuel prices dropped significantly during 2020 due to imposed lockdowns and movement restrictions worldwide. As many workers had been forced to stay at home, demand for fuel declined and with it fuel prices.

Fast forward to 2021, vaccinations in Europe, the US and China seem to help in the return to normality despite occasional coronavirus outbreaks. The demand for fuel and consumption has increased, but supply seems to be lower than needed. This has forced a spike in fuel prices, whether it is petrol, gas or oil.

China, Russia and the price cap affect your energy bill

According to a report by S&P Global Platts, China needs for gas are expected to increase by 8.4% this year on an annualised basis. The same report noted that gas imports are forecast to surge by almost 20%. As China’s industry is in need of more energy, neighbouring Russia has been accused by European Union officials that it has failed to increase gas exports to the bloc. The EU policymakers have criticised the Russian gas provider Gazprom and asked the European Commission to start an investigation, reviewing the Russian company’s export and pricing strategy.

The energy price cap is another factor that has played a significant role in creating the current crisis. The price cap sets out a maximum level for default energy tariffs two times per year based on the cost of supplying energy. It is scheduled to rise by more than 12% from October 1st and is likely to rise again next April. With the current pace of increase in energy prices though, some providers in the UK market have already gone bust, and more are expected to follow as they don’t have the necessary backup funds to withstand the changes.

How can you lower your energy bill?

Despite the energy price hikes, most households usually consume more energy than needed as we forget to switch off lights, leave the boiler on etc. All these affect your monthly bill and put a strain on your budget. However, here are some tips that could help you become more economical, saving some money that you can use for another purpose.

Lower the thermostat

It’s simple to turn on the heater whenever you feel cold – this is especially true if you work from home, and one thing is for sure; working from home is here to stay. Not being in the office means that heating expenses will surge this year as you will have to keep your home warm. A smart idea to save some money involves setting your heating on a timer and lowering the thermostat dial by one or two degrees below the average temperature. Economists suggest that this could save you £80-100 every year.

Use LED bulbs

The cost of leaving a light on in your home could reach £170 per year. If you would like to save some pounds, it would be good to start turning some lights off as Christmas isn’t near and there is no need to spend electricity like that. Another good trick that every homeowner should do is change regular lamps with led lamps.

Dry clothes outside

This tip may not be suitable for the UK in autumn and winter, but it could save you a significant amount of money in many warmer countries across the world. Using the dryer for 2-3 hours per week will cost you approximately £150 per year. The dryer is in the top places when it comes to devices with high energy consumption so don’t forget to consider this when thinking of ways to reduce your energy bills.

How can financial planning help you now?

Financial planning is essential for people who would like to achieve their financial goals. Especially during times of crisis that could reduce our available budget, a carefully designed financial plan could act as a shield against the financial consequences. However, many people don’t have the necessary financial knowledge to create a plan or the time to assess the situation and build a strategy. As the financial environment is rapidly changing, it is best not to take risks that could prove costly.

The best choice is to find a fully qualified financial adviser that can help you with the task of building a solid financial plan. At Holborn, our financial advisers are qualified, experienced and always stay on top of market developments and trends. Therefore, our team would be the right choice for you and your family’s plans and goals. Don’t hesitate to get in touch with us today and start building a better future today.