UK Inflation Rises to 3.4 Percent in December

The UK inflation rate edged higher at the end of 2025, driven by higher tobacco taxes and a surge in holiday travel costs, according to official data released on Jan. 21.

Consumer price index (CPI) inflation rose to 3.4 percent in the 12 months to December 2025, up from 3.2 percent in November, the Office for National Statistics said.

The increase marked a renewed uptick after inflation had cooled for much of the autumn, following a summer peak.

Alcohol and tobacco, along with transport costs, made the largest upward contributions to the monthly rise in both the CPI and CPIH, which includes owner occupiers’ housing costs.

The Bank of England had flagged the likelihood of a temporary rise at the end of the year.

Minutes from the Bank’s Monetary Policy Committee meeting, published on Dec. 17, said CPI inflation was expected to rise temporarily in December 2025 due to higher tobacco duty and stronger airfares inflation.

Tobacco, Flights, Food

Prices in the alcohol and tobacco category rose by 5.2 percent in the 12 months to December, compared with 4 percent in the year to November.

Transport prices rose 4 percent in the year to December from 3.7 percent in November, with a 1.3 percent monthly increase largely driven by higher airfares.

Food and non-alcoholic beverage prices rose by 4.5 percent in the year to December, compared with 4.2 percent in November.

Office for National Statistics Chief Economist Grant Fitzner said the December rise reflected a mix of tax changes and seasonal effects.

“Inflation ticked up a little in December, driven partly by higher tobacco prices, following recently-introduced excise duty increases,” Fitzner said on Jan. 21.

“Airfares also contributed to the increase with prices rising more than a year ago, likely because of the timing of return flights over the Christmas and New Year period.”

Fitzner said that rising food costs, particularly for bread and cereals, also pushed prices higher.

“These were partially offset by a fall in rents inflation and lower prices for a range of recreational and cultural purchases,” he said. Fitzner added that factory gate prices were unchanged on the year, while the rise in raw material costs for businesses slowed, helped by lower crude oil prices.

Politicians React

Rising grocery bills remain a sensitive political issue, particularly for lower-income households, despite government efforts to ease cost pressures.

UK Chancellor Rachel Reeves said on Jan. 21 that the government remains focused on easing household costs.

“Our number one focus is cutting the cost of living,” Reeves said. “That’s why we’re taking £150 off energy bills, freezing rail fares and increasing minimum wage. There’s more to do, but this is the year Britain turns a corner.”

Opposition figure and Shadow Chancellor Mel Stride said on Jan. 21 that recent economic data pointed to deeper problems.

“76,000 jobs lost in just two months. Business confidence shaken by Labour’s Jobs Tax and looming Employment Rights Bill,” Stride said in a post on X, adding that the Conservatives had “a clear plan to grow the economy, protect jobs and get Britain working again.”

In a separate post on the same day, Stride said the rise in inflation reflected the government’s “economic mismanagement” and was “hurting the most vulnerable.”

The latest inflation figures could move the Bank of England to keep interest rates on hold at its next meeting on Feb. 5, with the Bank Rate currently at 3.75 percent.