The personal finance expert says people will be “panicking” and have to “make awful choices”.
Martin Lewis has told the BBC that soaring energy bills have hit a crisis point, with more help needed.
“It will be desperate,” the consumer champion said. “It’s going to throw many households into a terribly difficult financial situation.”
It comes amid predictions that energy bills will rise even further next year as wholesale gas prices soar.
Energy firms Centrica and Shell on Thursday both reported big increases in profits due to rising energy prices.
Speaking to the BBC’s Today programme, Mr Lewis said he had “never seen anything like this”, and that people were going to be pushed into making “some awful choices”.
“Year-on-year from last October to this October a typical house will be paying £2,300 a year more on their energy bills alone. Forget the rises in mobile and broadband and tax and everything else and petrol and food,” he said. “People will be panicking, it will be desperate.”
The government has said that every household in the UK will get an energy bill discount of £400 this autumn as part of a package of new measures to tackle soaring prices.
But Mr Lewis said that more needs to be done now to help the poorest households.
“Rishi Sunak, Liz Truss, Boris Johnson, if you’re listening, please, go and sit in a room together, make a collective decision now of what help you can give and make an announcement now to forestall the mental damage that is coming across the country,” he said.
“There needs to be action now.”
His comments come as British Gas owner Centrica defended its decision to resume payouts to shareholders even as UK households come under pressure from rising energy bills.
The company has brought back an interim dividend of 1p per share, after reporting strong profits.
Adjusted operating profit for the six months ending in June rose to £1.34bn from £262m a year earlier.
The rise in profits came from the company’s nuclear and oil and gas business, rather than from British Gas. The customer energy supply business performed much worse. Many firms have been unable to fully pass on the rise in wholesale gas prices to customers.
Energy analyst David Cox said people would “react against” the sight of an energy company rewarding shareholders, as households struggle with bills.
“Any oil and gas company… that’s making a profit and giving some of that back to shareholders at this time, will face a backlash, particularly when we’re seeing projections of energy bills hitting almost £4,000,” he said.
Mr Cox, who used to work at British Gas, said that the firm had stopped paying a dividend over the past few years as it “didn’t have the money” to do so. But it had since made profits in its oil and gas exploration operations, which is why it is re-introducing payouts.
“Businesses are there to make a profit, and dividends are one way of sharing that with shareholders,” he said.
Centrica chief executive Chris O’Shea insisted a lot of the firm’s profits were “going back into society”.
“I know it’s difficult to see the word profits, or dividends, or similar words when people are having a tough time. I’m very conscious of this,” he said.
“Bear in mind, over the next couple of years we are expecting to pay a windfall tax of probably well over £600m on our UK gas business off the back of the profits that we’re seeing, so a lot of this is going back into society.”
Image source, Getty Images
Gas prices have risen dramatically because of a worldwide squeeze on energy supplies, and wholesale prices have gone up further because of Russia’s invasion of Ukraine.
Many of British Gas’ rivals have gone bust over the past year, as they struggled to pass on soaring gas prices to customers. At least 30 energy companies have stopped trading in the UK since August 2021.
British Gas said it added more than 200,000 customers in the first half of the year, including 158,000 customers that it picked up from failed supplier Together Energy.
UK energy bills increased by an unprecedented £700 in April and are likely to keep rising. One management consultancy, BFY, has warned that a typical energy bill could hit £3,850 a year by January, much higher than forecasts earlier this month.
BFY said its forecast reflected the increase in wholesale prices over the past few weeks with the ongoing tensions with Russia sparking concerns over winter supplies.
‘Rocketing’ prices
Energy giant Shell also reported strong results on Thursday, with second quarter profits of $11.5bn (£9bn).
The company also announced another $6bn share buyback programme for the current quarter, on top of the $8.5bn of shares it bought back in the first half of 2022. But it did not raise its dividend of 25 cents per share.
Environmental campaign group Friends of the Earth said the profits reported by both Centrica and Shell would be “greeted with disbelief” by those facing “rocketing energy prices”.
“The government must impose a tougher windfall tax on energy firms. The bulk of these profits should be used to insulate our homes and help cash-strapped households pay for their heating this winter, rather than developing more fossil fuel projects that roast the planet.”
In May, the government announced a windfall tax on UK oil and gas firms that could raise about £5bn in the next 12 months.