UK customer debt to energy suppliers at record high

UK consumers now owe a combined £3.8bn to energy companies – up from £2bn two years ago, and almost certainly the highest level of all time.  

Using figures from our clients across the retail energy industry, Baringa has calculated that one in five UK households are currently in debt to their supplier. The average indebted customer owes more than £1,500 – a 25% increase in average customer debt year-on-year, and the total which reflects just under a year’s worth of average energy bills.  

Baringa’s analysis is based on our examination of the debt books of some of the UK’s largest energy firms, as well as a collection of their smaller rivals – a dataset covering customer accounts associated with roughly half the gas and electricity meters in the country.  

The statistics paint a picture of an energy debt crisis – one which risks worsening if the energy price cap rises as forecast in the next quarter.  

This presents an urgent challenge for all parts of the retail energy ecosystem, because no-one wins where debt is concerned: consumers are put under huge stress, many will default, loading the cost of defaults onto other households in the form of higher bills.  

The situation also hampers the country’s net zero commitments. Customers struggling to service unaffordable energy debt are unlikely to invest in the insulation and green technologies necessary for greening the country’s housing stock.  

Baringa believes that a tipping point has been passed, and the current set of policies, remedies and processes are not sufficient to reverse the trend towards ever-greater customer debt. When tackling the problem, recent focus has been on cure – providing help for people already caught in a debt trap. More consideration should be given to prevention – providing the public and private sectors with the permission and the tools to identify and help at-risk individuals and households before the trap snaps shut around them.  

To learn more about the benchmarking study, or to understand how Baringa is working with energy companies to understand and address the issues highlighted by the report contact James Cooper.