UK inflation hits 3.5% in April, highest in an year

UK inflation surged to 3.5% in April, the highest rate in more than a year, driven by sharp rises in gas, electricity, water, transport costs and increased employer national insurance and minimum wage pressures.

The Office for National Statistics (ONS) revealed the consumer prices index (CPI) jumped more than expected, surpassing forecasts of 3.3% from City economists and the Bank of England’s 3.4% projection. This follows a decline in inflation to 2.6% in March.

The Guardian, who first reported the story, specualted that rising household bills, dubbed an “awful April,” pushed up energy prices after sharp falls a year earlier due to changes in the Ofgem energy price cap.

Water and sewerage charges rose 26.1%, the fastest increase since privatisation, while vehicle excise duty also climbed significantly.

Monica George Michail, economist at the National Institute of Economic and Social Research, warned inflation is likely to stay elevated for months, forcing the Bank of England to delay further interest rate cuts.

“With wage hikes, national insurance increases and regulated price rises, many costs will be passed to consumers through higher prices,” she said. “We expect just one further rate cut this year.”

The British Chambers of Commerce said rising costs and bills are creating a “perfect storm” for businesses. Their research suggests 55% of firms plan to raise prices in coming months.

Financial markets adjusted expectations, pushing back anticipated interest rate cuts from June and August to September, with rates expected to drop from 4.25% to 4%.

Despite inflationary pressures, falling oil prices and heavy discounts on clothing helped temper the overall increase.

Analysts at ING noted that a rise in services inflation, partly caused by vehicle tax hikes and Easter’s timing, pushed CPI above forecasts. They predict inflation will ease to around 4.5% this summer, allowing for quarterly Bank of England rate cuts into 2026.

The Bank’s monetary policy committee recently cut rates to 4.25%, but voting was divided, signalling uncertainty on future moves.

Chancellor Rachel Reeves acknowledged ongoing cost of living pressures but vowed to help ease household budgets.

Shadow Chancellor Mel Stride criticised the government, blaming Labour’s economic management for rising inflation and warning of longer-lasting high interest rates.

Political backdrop:

The UK’s rising inflation comes amid ongoing tensions within the Labour government over tax and spending policies.

A leaked memo revealed Deputy Prime Minister Angela Rayner’s department had urged Chancellor Rachel Reeves to raise taxes by £3bn to £4bn annually before this year’s Spring Statement — a proposal Reeves did not adopt, instead opting for £5bn in welfare cuts.

This internal debate highlights divisions in Labour between those pushing for higher taxes, including potential increases to corporation tax and restoring pension allowances, and those wary of further tax hikes amid public cost-of-living pressures.

Labour ministers are also facing criticism over cuts to welfare and winter fuel payments for pensioners, with some party members concerned these measures could increase poverty and electoral losses.

These fiscal debates add political weight to the inflation figures and complicate the Bank of England’s challenge as it navigates monetary policy amid rising prices and calls for interest rate cuts.