Energy price hikes spark debt crisis: Brits borrow almost £5 billion to stay afloat

The UK’s energy crisis has prompted one in five (20%) Britons to rely on credit cards, loans and overdrafts to manage the mounting costs recorded over the last three months.

The vast majority of Brits (78%) say they have experienced price hikes since the beginning of the year, leading households  to rack up £4.7 billion in debts, according to smart money platform, Credit Karma.

Since the beginning of 2021, Brits have experienced price rises of about 23% on average. Unable to avoid the rising costs, more than a quarter (26%) fear they can no longer afford their bills, despite consumption remaining consistent.

In an attempt to counter the rocketing price of energy, 40% have cut back on consumption, making do without heating or switching off electronics, while others have been forced to dip into their savings to make ends meet.

The desperation of the situation is real for many British households. According to the study, 25% of Brits say the rising costs of energy and gas, paired with reduced incomes, have priced them out of necessities. For some, the situation is so dire that they’ve had to move in with relatives or share their homes with more people to share the cost of bills. Others have even had to take on additional work to get by.

However, the issue of rising energy prices is far from over. This could result in a debt crisis for Brits, as the vast majority (79%) of those who have borrowed money to counter the rising cost of bills fear they won’t be able to meet repayments.

Akansha Nath, Head of Partnerships at Credit Karma commented: “Right now, high wholesale costs are preventing energy providers from offering competitive tariffs, limiting consumer choice and removing the incentive to switch. As a result, turning to credit to make ends meet has become essential for many. While much of this is outside of customers’ control, there are things they can do to ease their financial stress.”

Akansha goes on to share her top tips on managing your finances during the energy crisis:

  • Given the majority of fixed tariffs are not cheaper right now, staying on your existing tariff might be your best bet for maintaining the lowest rate available

  • There are many schemes you can use to get help with your energy bills, including the government’s relief scheme providing up to £350 in cash per household

  • Contact your energy provider if you’re strained to the point where you’re struggling to pay your bills, to find out if there are any options available to you

  • And if you find yourself needing to use credit to bridge the gap, make sure you’re getting the best rate and that you’re not taking on more than you can reasonably afford to repay