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UK: Ofgem price cap to rise 1.2% in Q1; broadly in line with expectations

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  • Ofgem has announced that the energy price cap (which impacts the prices paid by the majority of UK consumers for gas and electricity) will rise by 1.2% for the period 1 January to 31 March to GBP1,738 per year (from GBP1,717 in Oct-Dec).
  • Note that due to base effects, gas and electricity prices are still contributing negatively to headline Y/Y CPI. This is despite that negative contribution reducing by 0.57ppt in the October print published this week as the Ofgem price cap rose 9.5% on 1 October.
  • Today's announced increase of 1.2% is smaller than the 5.1% increase seen in Q1-24. In Y/Y terms the price cap will be 9.9% less in Q1-25 than in Q1-24 (versus -6.4% less in Q4-24 than in Q4-23).
  • When looking at the impact on headline CPI, it is not exactly a one-to-one relationship with the price cap. The BOE's forecasts are probably slightly overstating the fall in Q1-25 but only by a couple of hundredths of a percentage point in headline CPI terms.
  • So overall this is broadly in line with expectations.
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  • Ofgem has announced that the energy price cap (which impacts the prices paid by the majority of UK consumers for gas and electricity) will rise by 1.2% for the period 1 January to 31 March to GBP1,738 per year (from GBP1,717 in Oct-Dec).
  • Note that due to base effects, gas and electricity prices are still contributing negatively to headline Y/Y CPI. This is despite that negative contribution reducing by 0.57ppt in the October print published this week as the Ofgem price cap rose 9.5% on 1 October.
  • Today's announced increase of 1.2% is smaller than the 5.1% increase seen in Q1-24. In Y/Y terms the price cap will be 9.9% less in Q1-25 than in Q1-24 (versus -6.4% less in Q4-24 than in Q4-23).
  • When looking at the impact on headline CPI, it is not exactly a one-to-one relationship with the price cap. The BOE's forecasts are probably slightly overstating the fall in Q1-25 but only by a couple of hundredths of a percentage point in headline CPI terms.
  • So overall this is broadly in line with expectations.