Fuel poverty has become an increasingly prominent issue in the UK, with the Resolution Foundation noting in a new report that the number of households behind on energy bills has doubled over the last 12 years. This trend reflects a combination of economic pressures, market structures, and inefficiencies in the housing sector.

A key cause lies in the dynamics of the energy market. Despite recent declines in wholesale gas and electricity prices, households are still facing higher retail bills. This is partly explained by the way energy suppliers purchase fuel in advance (hedging), which delays the pass-through of falling wholesale prices. Regulatory decisions also matter: Ofgem has recently raised the energy price cap by 2%, demonstrating how policy choices can compound household pressures. Alongside this, persistently weak wage growth and high inflation have squeezed real incomes, limiting households’ ability to absorb higher energy costs.

Structural factors also play a role. The UK’s housing stock is among the least energy-efficient in Europe, meaning more energy is required to heat homes adequately. Private renters and low-income households are disproportionately exposed, as they are less able to invest in insulation or modern heating systems.

The consequences of fuel poverty are severe and multidimensional. Economically, households may accumulate debt or be forced onto prepayment meters, which often involve higher tariffs. Socially, fuel poverty exacerbates inequality, disproportionately harming vulnerable groups such as the elderly. Health outcomes are also affected: cold homes are linked to respiratory illnesses and excess winter deaths.

Ultimately, fuel poverty illustrates the interaction of microeconomic inefficiencies (poor housing stock), market regulation (price caps), and macroeconomic pressures (real wage stagnation), making it a critical issue for both policymakers and economists.