Higher energy prices over the past four years have cost the United Kingdom £183 billion, with government borrowing for support schemes adding £2.4 billion a year in interest for 14 years.
E3G has collaborated with ECIU to assess the costs of the fossil fuel energy crisis to the UK economy and households. Previous analysis has looked at the impact of the increase in gas prices on the UK economy, but this study goes further. We looked at how the spike in prices of both gas and oil affected the UK economy, as well as the cost of the borrowing to cover the government support schemes to address the crisis.
The study has concluded that dependency on fossil fuels has cost the UK economy an additional £183 billion in the last four years. This is more than the £177bn that NHS England spent on health services in 2024/25.
Higher bills and dealing with the impacts on households and businesses
The £183 billion cost is made up of the following elements:
An extra £59 billion spent by households on energy and fuel costs since 2021, despite the government support schemes.
An extra £65 billion spent by business and industry, taking the UK’s total extra energy costs to £125 billion.
£45 billion to deal with the bankruptcy of over 30 energy suppliers.
£55 billion net cost of the government’s support schemes to cap energy bills, after taking into account windfall taxes on energy companies.
The direct impact of the fossil fuel price spikes on household energy bills has been an extra £2,160 over four years, leading to domestic energy debt and arrears being up 150% since late 2021. But the wider economic effects have compounded impacts on households. Our analysis shows that direct energy costs were responsible for a third of the cumulative inflation experienced by households from 2021 to 2023, with food prices – themselves sensitive to energy prices among other factors – also much higher.
Clean energy and insulation must be a priority in the Budget
The findings come just before the Budget, when the government is expected to take action to reduce energy bills. Media reports suggest that the Chancellor is considering doing this by delivering a VAT cut across energy bills and axing the ECO levy which funds insulation, heat pumps and solar panels in low-income households. This potential outcome has been strongly criticised by business and civil society groups who have said that energy efficiency and clean energy measures are critical to bringing down energy bills. They have recommended instead that the government retains all Warm Homes funding but take levies off electricity bills, paying for them via the Exchequer. This would maximise funding for getting off gas and incentivise electrification.
This report is a joint publication by E3G and the Energy Climate Intelligence Unit (ECIU).