Goldman Sachs warns UK inflation could hit 22% if energy prices continue to soar

Leading investment bank Goldman Sachs has forecast that UK inflation could hit 22% in the early months of next year if energy prices continue to climb.

Pressure on household and business finances continues to grow as wholesale gas and electricity price rises show no sign of slowing down.

Economists at Goldman Sachs predicted that if energy prices remain at their current levels, Ofgem could be forced to raise the energy cap on household bills by another 80% again in January, leading to inflation peaking at just over 22%.

Bloomberg reported the prediction contained in a market note by Goldman Sachs economists on Monday, after an upward spiral in gas prices.

Inflation has already risen above 10% for the first time since the 1980s, hiking up the cost of everyday items, including groceries.

Goldman Sachs' economists' prediction is almost double the 13% inflation figure the Bank of England forecast last month, as it hiked interest rates.

And, even if energy prices remain moderate, inflation is predicted to peak at around 14.8% - which is still enough to push the UK into a recession.

The grim news will do little to put those at the sharp end of the cost of living crisis at ease.

The latest dire warnings adds to the mounting pressure on Tory leadership contenders Liz Truss and Rishi Sunak to come up with a roadmap out of the growing financial crisis, when one of them is handed the keys to Number 10 next week.

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Wholesale gas prices in the UK have climbed by 145% since the start of July as fears of Russia further squeezing supply grows.

The news follows polling that nearly one in four adults plan never to turn their heating on this winter.

The survey of more than 2,000 UK adults found 23% would not turn their heating on at all over the winter months, with this figure rising to 27% among parents with children under 18.

In the poll, which was carried out by Savanta ComRes before the new price cap was announced, 69% of respondents said they would switch their heating on less, and one in 10 said they would take out a loan.

Millions of households are in for a dire winter, with the energy price cap set to rise by 80% by October, pushing the average household’s yearly bill up from £1,971 to £3,549.

The government is under pressure to do more to help under-pressure households, after announcing a package of £400 energy discounts earlier this year, along with £650 cost of living payments for the most vulnerable in society.

The business sector is also warning of a looming jobs crisis, spearheaded today by pub bosses warning soaring energy costs could trigger mass closures.

A group of major pub owners penned an open letter to the government demanding help for hospitality, as businesses, unlike households, operate without a regulated energy price cap