Millions of mobile phone and internet users could be paying 17.3% more on their bills this time next week
Millions of mobile phone and internet users are facing a price increase of 17.3% on their bills in just a week’s time.
Every April, many broadband and mobile firms raise their prices in line with the Consumer Price Index (CPI) plus an additional 3-3.9%.
As these price rises are often applied mid-contract, people either have to accept these new prices or pay costly exit fees to leave their contract early.
But with some 11 million people out of contract, if they switch before the rise next week they would be exempt from the increase.
It comes as industry regulator Ofcom launched a review to determine if consumers have enough clarity on mid-contract cost increases.
Uswitch has also been campaigning to allow all consumers to leave contracts penalty-free in the face of price rises as most providers don’t allow this. The price comparison site believes providers who impose inflationary increases should allow customers to leave their contract early without penalty, or offer contracts where the price remains fixed for the duration.
Ernest Doku, telecoms expert at Uswitch, said: “There is still time to avoid the impact of April’s price rises. Broadband and mobile customers should check now to see if they can switch to avoid paying more than they need to.
“Millions of consumers are currently out of contract, and therefore can still shield themselves from the brunt of these inflation-busting increases.
“Not only could you switch to a faster and more reliable product, but also pay less per month – although future price rises may still apply from 2024 in many cases.”
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Some internet companies have confirmed they will be doing more to help vulnerable and low-income households. For example, Vodaphone is automatically exempting customers that it has identified as financially vulnerable from this year’s price rises.
TalkTalk has said it will automatically exempt its most financially vulnerable customers – but did not explain its criteria for assessing this or how it would be publicised.
Providers know that for financially vulnerable customers, mid-contract price rises are potentially devastating – which is why their social tariffs offer fixed prices that are exempt from annual rises.
Based on the average amounts paid by low-income customers in Which?’s latest broadband survey, the consumer champion calculated how much a low-income BT, EE, Plusnet, TalkTalk or Vodafone customer (those earning £21,000 or less a year) could see their payments increase.
It found this group could see payments go up £77 per year. On average, they face a rise of £52 annually and look set to pay £431 a year for their broadband – at least 2% of their annual income.
BT customers had the highest monthly prices of any of the companies Which? looked at and could see an annual increase of almost £60 from next week. Low-income BT customers could also face the highest exit fees, costing £194.34 if they want to leave a year early.
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Unexpected rise in UK inflation
Switching to a social tariff
Which? research shows that the average low-income customer affected by the price rise could save as much as £220.32 – £18.36 per month – by switching to a social tariff.
These are cheaper broadband and phone packages for people claiming Universal Credit, Pension Credit, and some other benefits.
They are delivered in the same way, just at a lower price. Some providers may call them “essential” or “basic” broadband.
BT customers would make the biggest annual saving of £260.16 (£21.68 a month) by switching to a social tariff. Vodafone customers would make the lowest savings of £168 a year (£14 a month).
Rocio Concha, Which? Director of Policy and Advocacy, said: “Telecoms providers must urgently cancel the 2023 price hikes for financially vulnerable customers. They should work to proactively identify these customers and ensure they’re not financially penalised, even if they don’t take up a social tariff.”
Black Friday sales do not appear to have provided much cheer for retailers amid continued consumer caution, according to official figures.
The Office for National Statistics (ONS) reported a 0.1% decline in sales volumes during November, compared to the previous month, when the data is adjusted for seasonal effects due to the pre-Christmas shopping bonanza falling in December last year.
Economists polled by the Reuters news agency had expected growth of 0.4%. The dip was worse when the effects of fuel sales were excluded.
Rolling three-month data showed positive sales volumes were only propped up by strength in September.
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ONS senior statistician Hannah Finselbach said: “Retail continued to grow in the three months to November, helped by a strong performance from clothing and tech shops.
“This year November’s Black Friday discounts did not boost sales as much as in some recent years, meaning that once we adjust for usual seasonality, our headline figures fell a little on the month.
“Meanwhile, our separate household survey showed that although some people said they were planning to do more shopping… this Black Friday than last, almost twice as many said they were planning to do less.”
The data was released against a backdrop of widespread consumer and business caution in the run-up to the budget on 26 November – held just two days before Black Friday – although promotional activity was already well underway before Rachel Reeves’s speech.
That period was dominated by on-off signals over income tax hikes and black holes in the public finances, but the budget itself largely backdated many of the most painful measures towards the end of the parliament.
While the ONS data does little to boost retailers’ expectations for the Christmas season, there was a crumb of comfort to take from a closely-watched survey released just beforehand.
GfK’s consumer confidence index nudged up to its joint-highest level this year – though it remained deep in negative territory.
The biggest upwards contribution came from a willingness to make major purchases, despite perceptions for personal finances weighing amid continuing cost-of-living pressures in the economy.
Neil Bellamy, GfK’s consumer insights director, said: “Consumers resemble a family on a festive winter hike, crossing a boggy field – plodding along stoically, getting stuck in the mud and hoping that easier conditions are not far off.”
We have had better economic news since the survey was completed.
It was revealed this week that a much larger decline in the rate of inflation, to 3.2% from 3.6%, had allowed the Bank of England to cut interest rates to 3.75%.
It promises a boost to spending power as borrowing costs come down further, with wage growth still rising above that pace for price growth.
It is now hoped that the end of the budget circus will spark some life into the economy following two consecutive monthly contractions for output and a surge in the unemployment rate.
Much of the increase has been attributed to the retail and hospitality sectors reacting to sharp rises in employment costs under the Labour government.
Consumer spending accounts for around 60% of the UK economy.
Richard Carter, head of fixed interest research at Quilter Cheviot, said of the outlook: “Markets do not believe growth is coming to the UK anytime soon.
“Indeed, the UK is likely to slip into recession if the latest GDP figures are anything to go by, and there is little sign of positive momentum being generated.”
The Bank of England has cut interest rates from 4% to 3.75%, its sixth cut since last summer.
The decision follows a bigger-than-expected fall in the consumer price index rate of inflation in data released this week. While inflation is still above the Bank‘s 2% target, the fall to 3.2% helped swing today’s decision, with five of the Bank’s nine-member monetary policy committee (MPC) voting for a cut.
The governor, Andrew Bailey, who had voted to leave rates on hold in November pending more data on inflation, shifted his vote this time around.
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“We’ve passed the recent peak in inflation and it has continued to fall,” he said, “so we have cut interest rates for the sixth time, to 3.75 per cent, today. We still think rates are on a gradual path downward. But with every cut we make, how much further we go becomes a closer call.”
The decision will mean those with floating rate mortgages should immediately see a reduction in their monthly repayments – and some lenders are now reducing fixed-rate deals to 3.5% or below.
The Bank also gave its first full assessment of the economic impact of last month’s budget. It said the budget, which included measures to reduce energy bills and freeze fuel duty, should help push inflation half a percentage point lower next year.
That would mean CPI inflation would drop to close to the Bank’s 2% target as soon as the second quarter of 2026, nearly a year earlier than it originally expected.
However, the Bank also warned that growth remained weak. It said it expected gross domestic product to flatline in the fourth quarter of the year.
Since the decision was a narrow one, with four members of the MPC voting against the cut, some investors might judge that the Bank remains finely balanced on future decisions. Right now investors expect another cut by the end of next spring and, possibly, another one thereafter.
But whether rates eventually settle at 3.5% or 3.25% – or even lower – remains a matter of debate.
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