UK inflation rises to 3.4%, first increase in five months

"UK inflation rose for the first time in five months over the Christmas period, driven by higher tobacco prices following tax rises announced by the chancellor and a sharp increase in airfares, according to official figures. Data published on Wednesday by the Office for National Statistics showed that consumer price inflation climbed to 3.4 per cent in December, up from 3.2 per cent in November and above economists' expectations. It marked the first increase in inflation since July last year and keeps price growth well above the Bank of England's 2 per cent target."

"The ONS said the rise was largely driven by an acceleration in tobacco prices, alongside higher airfares and rising food costs. Across her October 2024 and November 2025 budgets, the chancellor, Rachel Reeves, increased duties on cigarettes and other tobacco products and introduced a new tax on vapes. Alcohol and tobacco inflation rose to 5.2 per cent in December, up from 4 per cent the previous month, while airfares jumped by 28.6 per cent year-on-year. Food inflation also edged higher, increasing to 4.5 per cent from 4.2 per cent, with bread and cereals among the biggest contributors."

"Paul Dales, chief UK economist at Capital Economics, said the timing of the Budget had played a key role in the data. "The later-than-usual Budget on November 26 meant that the rise in tobacco duties was only captured in the ONS's December survey," he said. Grant Fitzner, chief economist at the ONS, said inflation had "ticked up a little" in December, partly due to excise duty increases on tobacco. He added that airfares had risen more sharply than a year earlier, "likely because of the timing of return flights over the Christmas and New Year period"."

Consumer price inflation in the UK increased to 3.4 per cent in December from 3.2 per cent in November, marking the first monthly rise since July and remaining above the Bank of England's 2 per cent target. The rise was mainly driven by faster tobacco price inflation after tax and duty increases, a 28.6 per cent year-on-year jump in airfares, and higher food prices including bread and cereals. Alcohol and tobacco inflation reached 5.2 per cent. The later-than-usual November Budget meant tobacco duty increases were captured in December, and holiday flight timings also pushed airfares up, while weaker recreational and cultural inflation partially offset the overall increase.

Read at Business Matters