- The invasion of Ukraine will propel Europe's already high energy prices even higher: We expect at least +30% increase in the energy bill for 2022, hitting low-income households in the UK and Germany the hardest. For 2022, we calculate a total energy bill per household of EUR3400 in Germany, over EUR3000 in the UK, EUR2800 in France and just below EUR2000 in Italy and Spain.
- Compared to the pre-war situation, for the average consumer, this represents an additional loss of -2pp in the UK, -1.5pp in Germany and -1pp in France, Italy and Spain. In the worst-case scenario where energy supply is partially cut and energy prices increase by an additional 70% (20% probability), disposable income for the average European household would be cut by an additional -2.5pp. This would bring the total cost to more than -4pp in the UK and Germany, equivalent to an additional cost of more than EUR1200 per household.
- For more than half of households, excess savings are not enough to absorb the income squeeze from higher energy bills. Without further state support measures, the resulting reduction in consumer spending could cut GDP growth by -0.6pp in the UK, -0.5pp in Germany and -0.4pp in France, Italy and Spain. In the worst case scenario, the cost on growth from lower consumer spending could reach up to -1.1pp.
- In this context, additional state support of more than EUR20bn will be needed in Germany, EUR14bn in the UK, EUR17bn in France and close to EUR10bn in Italy and Spain. In the worst case scenario, the additional support needed could reach EUR75bn in Germany and EUR50bn in the UK and France. Acting on both demand (i.e; rationing of non-essential activities) and supply (i.e. strategic reserves) could help: a supply cut for non-energy uses of oil & gas would increase the supply for energy use by +10% in Germany, +9% in France and about +6% for both Italy, Spain and the UK.
Russia-Ukraine crisis
The (energy) price of war for European households
Contact
Ana Boata
Allianz Trade
Allianz Trade
Ano Kuhanathan
Allianz Trade
Allianz Trade
Selin Ozyurt
Allianz Trade
Allianz Trade