The news grows bleaker for the UK as another bank has predicted record-breaking inflation for the country, saying it could soar above 22% in 2023.

Investment Bank Goldman Sachs said inflation could peak at 22.4%, far above its 14.8% baseline forecast, after the wholesale price of gas, a key source of power for heating and cooking in UK homes, surged by 145% at the start of July.

The bank said earlier this week that the UK faces recession in the fourth quarter of 2022, and its inflation prediction topped Citigroup’s forecast last week, which was 18.6%.

Goldman economists said that if gas prices stay at current peaks, the UK will be forced to increase its energy cap by a further 80% in January, on top of an 80% increase already announced for October.

Even if energy costs moderate, as Goldman commodities analysts expect, UK inflation could still peak at 14.8% in January, up from 10.1% last month.

Liz Truss, who is likely to be installed as the country’s new leader on Monday following the resignation of Prime Minister Boris Johnson in July, will have a battle on her hands to tackle the soaring prices, which will cause utility bills to surge for millions of Britons when the price cap rises in October and coincides with colder weather.

Bleak winters for Europe

Ratings agency S&P also predicted bleak winters for European Union countries struggling to find alternative energy sources, as the war in Ukraine has forced them to reduce reliance on Russian gas.

While the UK only imports 6% of its natural gas from Russia and 16% from France, S&P said Germany and Italy will be heavily affected, with Germany relying on Russia for 60% of its natural gas supply as of 2020, while in Italy, the figure is 40%.

S&P said EU countries are in a race against time to reduce gas consumption by 15% to protect households and businesses from power cuts and rationing this winter.

The ratings agency said that under a downside scenario of a full Russian gas cut-off, there could be mandatory gas rationing in EU states, with Germany falling into recession and eurozone growth weakening by 1.4 percentage points as a result.

Italy has made more progress than Germany in diversifying its gas sources, now importing gas from Algeria, but its economy is still not shielded from higher costs of gas from non-Russian producers, S&P said.

(Reporting by Imogen Lillywhite; editing by Cleofe Maceda)