Closing post
For households across Britain, April was an awful month. Rising energy bills, broadband costs and the sharpest increase in water bills since privatisation – despite public anger over the quality of service offered – all added to the cost of living squeeze.
Economists had forecast a jump in inflation based on the flurry of annual bill increases. But at 3.5% – the highest rate in the G7 – the rise was bigger than the 3.3% rate predicted in the City, and will raise concerns at the Bank of England.
Marks & Spencer has said it will take an estimated £300m hit to profits this year from a damaging cyber-attack that it expects to disrupt its online business into July.
A £25m post-Brexit border control post in Portsmouth may have to be demolished if the UK government’s deal with the EU removes the need for health and veterinary checks on food imports, according to the port’s director.
One of the UK’s biggest energy developers will cut its planned spending on new renewables projects in a blow to the government’s 2030 clean power targets.
SSE warned that it would be unlikely to meet its own renewable energy goals for the end of the decade after shrinking its five-year spending plans by £3bn to £17.5bn.
Keir Starmer has confirmed that his government will loosen the eligibility rules for winter fuel payments to pensioners after a backlash against the decision to means test the benefit.
Speaking at prime minister’s questions, Starmer said that more pensioners would be eligible for the payment.
Angela Rayner urged Rachel Reeves to consider a series of wealth tax rises, it has been revealed, in a move that underscores growing unease within the government over the chancellor’s tight spending plans.
Thank you for reading. We’ll be back tomorrow. Take care! – JK
The German Council of Economic Experts has cut its forecast for Europe’s largest economy, and now expects it to flatline this year during a “pronounced phase of weakness”.
The academic body that advises the German government on economic policy had predicted the economy would grow by 0.4% this year in previous forecasts published in November.
Germany is the only member of the G7 group of advanced economies that failed to grow in the last couple of years years, burdened by fiscal restraints and an industrial downturn.
Veronika Grimm, a member of the council, told a press conference in Berlin:
The unfavourable effects of the overall economic weakness phase on the labour market continue.
The number of unemployed people in Germany is approaching the 3 million mark
for the first time in the last decade, and Donald Trump’s trade tariffs are expected to deal a major blow to the export-oriented economy. The US was Germany’s biggest trading partner last year.
Monika Schnitzer, chairwoman of the council, said:
The German economy will be significantly influenced by two factors in the near future: U.S. tariff policy and the fiscal package.
Ulrike Malmendier, another council member, told the press conference.
Even if tariffs are reduced, Trump succeeds with his ‘deal economy’ and countries simply trade and the tariffs are not that high, he has managed to introduce enormous uncertainty into the system.
Wall Street stocks have fallen as investors are nervous ahead of a key debate around Donald Trump’s tax cut bill that has fanned concerns around the US’ mounting debt pile.
The Dow Jones fell by more than 300 points, or 0.8%, while the S&P 500 lost 30 points, or 0.5%, and the Nasdaq slid by 140 points, or 0.7%.
European indices are flat to slightly lower.
The dollar has slid by 0.5% against a basket of major currencies, extending a two-day decline.
Blow to UK’s 2030 clean energy targets as SSE cuts spending on renewables
One of the UK’s biggest energy developers will cut its planned spending on new renewables projects in a blow to the government’s 2030 clean power targets.
SSE warned that it would be unlikely to meet its own renewable energy goals for the end of the decade after shrinking its five-year spending plans by £3bn to £17.5bn.
The spending cuts will include investing £1.5bn less on developing renewable energy initiatives, including offshore windfarms and a hydropower project, with another £1.5bn cut from its planned spending on other energy and transmission projects.
SSE’s outgoing chief executive, Alistair Phillips-Davies, blamed “delays to policy and planning” and “a changing macro environment” for the spending cuts, which have cast fresh doubt on the government’s clean power goals.
Phillips-Davies said the company had faced delays to two Scottish renewable energy projects – the Coire Glas hydropower project in the Highlands, and the Berwick Bank offshore windfarm development, which was submitted to the Scottish government for approval in late 2022.
Together these renewable energy projects would power the equivalent of approximately 9m households in the UK once operating. SSE has also faced delays to the second phase of its Arklow Bank offshore windfarm off the Irish coast.
Asda is planning to raise £400m from the sale and leaseback of 20 supermarkets to help fund the turnaround of its business.
The grocer has appointed property advisor Eastdil Secured to sell the stores, which it plans to lease back over the next 20 years, as first reported by Green Street News.
The deal comes four years after the £1.7bn sale and leaseback of Asda’s warehouse network in 2021 formed a key part of financing the takeover of the supermarket by private equity group TDR Capital and the British billionaire Issa brothers.
The group, which trades from 580 supermarkets, almost 500 convenience stores and 769 petrol forecourts, also cut debt with a £650m deal to sell – and lease back – about 25 supermarkets to US-based company Realty Income Corporation in 2023.
It comes after Asda’s new chairman Allan Leighton warned that profits were likely to decline this year as it invested more in cutting prices and putting more staff in shops.
The chain’s listed rivals – Tesco, Sainsbury’s and Marks & Spencer – had £4bn wiped off their stock market values amid fears that it would be costly for them to respond.
A spokesman for Asda, which is now controlled by TDR, said:
Sale-and-leasebacks have been a feature of the retail industry for many years.
While maintaining a strong freehold base remains central toAsda’s property strategy, we will consider suitable opportunities to unlock value from our property portfolio as part of our material programme of investment into the business.
Liberty Steel considering sale of Yorkshire business
More on Liberty Steel: the group has confirmed that it is considering a sale of its Speciality Steel UK (SSUK) business in South Yorkshire, saying that “change is essential”.
This business operates an electric arc furnace at Rotherham and a related works at Stocksbridge.
The company claimed today that Liberty’s owner, Sanjeev Gupta, had invested £200m in the business over the last four years to cover losses and pay salaries, but added that it faced industry-wide pressures on the steel industry.
It came after London’s high court granted it eight more weeks to pursue talks with an unnamed potential new investor if it cannot agree a deal to restructure debts.
Jeffrey Kabel, Liberty’s chief transformation officer, said:
Today’s adjournment is a positive development, allowing us the necessary time to finalise options including a sale of the business while we continue to pursue our debt restructuring efforts.
We remain committed to finding the right solution that preserves electric arc furnace steelmaking in the UK, a vital national asset serving strategic supply chains.
SSUK has been involved in complex debt restructuring since the collapse of Greensill Capital in 2021, restricting its access to capital. However, like all steel producers in the UK, SSUK has faced long-standing competitiveness challenges dating back decades.
We recognise that change is essential to set the business on a positive trajectory and provide certainty for our creditors, employees, and stakeholders.
It is understood that the company will continue to pay salaries for employees for May.
Updated
Bigger than expected inflation jump worsens Bank of England dilemma
Here’s our analysis on the jump in UK inflation to 3.5% in April.
For households across Britain, April was an awful month. Rising energy bills, broadband costs and the sharpest increase in water bills since privatisation – despite public anger over the quality of service offered – all added to the cost of living squeeze.
Economists had forecast a jump in inflation based on the flurry of annual bill increases. But at 3.5% – the highest rate in the G7 – the rise was bigger than the 3.3% rate predicted in the City, and will raise concerns at the Bank of England.
Most of the increase was down to energy costs, after a well-telegraphed 6.4% increase in the Ofgem consumer price cap. However, there was a much bigger leap in water and sewerage bills, where prices rose by a whopping 26.1%, the biggest annual increase since February 1988.
Liberty Steel in talks with a potential new investor to save Yorkshire sites
Liberty Steel has said it is in talks with a potential new investor to step in and save its ailing steel operation in South Yorkshire, as a judge granted it more time to avoid a liquidation that could put 1,500 jobs at risk.
The company’s subsidiary, Speciality Steel UK Limited, was granted until 16 July to carry out talks with the unnamed investor, at an insolvency hearing at London’s high court today. The company operates an electric arc furnace at Rotherham and a related works at Stocksbridge.
Judge Prentis this morning granted an adjournment of eight weeks, until 16 July, for the company to try to work out a sale, after a supplier filed a winding up petition with the court to try to reclaim £4m in unpaid debts.
Those debts were part of more than £600m owed by Speciality Steel, which is ultimately owned by Sanjeev Gupta. A proposed restructuring plan to cut those debts failed earlier this month, with Gupta’s global GFG Alliance metals empire under severe financial pressure.
Daniel Judd, representing the company, told the court the company was “urgently considering its options”, including talks with an unnamed “third-party investor”.
Urgent meetings have been taking place to advance this.
The judge said that an adjournment “is in the circumstances fine” after hearing brief arguments about the importance of the plant to the economy in South Yorkshire.
Updated
UK gilt auction disrupted by Bloomberg outage
A UK government bond auction has been delayed, after the data and news company Bloomberg suffered an outage to its terminals, used by traders and other financial professionals.
The UK Debt Management Office, which conducts gilt auctions, said it had extended the bidding window for this morning’s auction of gilts – as UK government bonds are known – maturing in 2031.
Due to the ongoing market-wide Bloomberg system issues, the bidding window for this morning’s auction of the 4% 2031 is being extended.
Traders and market sources reported that live pricing and market data was not functioning and screens were blank.
“My Bloomberg terminal is currently not working, only the chat function is still up,” a Bloomberg user told Reuters.
UK house prices grow faster while rent rises slow
House prices grew at a faster rate in March, while rent increases slowed last month.
The Office for National Statistics said the average UK house price increased by 6.4% to £271,000 in the year to March, up from an annual rate of 5.5% in February.
Average private rents climbed by 7.4% in the year to April, down from 7.7% growth in March.
House prices increased to £296,000, up 6.7%, in England’ £208,000, up 3.6%, in Wales, and £186,000, up 4.6% in Scotland, in the 12 months to March.
Tom Bill, head of UK residential research at Knight Frank, said:
Stripping out the impact of the stamp duty deadline, the pressure on house prices this spring is downwards. Inflation is proving to be stubborn, which will prevent mortgage rates from falling as quickly as hoped, and buyers are hesitant due to growing household financial pressures and wider economic concerns.
On top of that, asking prices will need to reflect the fact that supply currently far outweighs demand. Demand is likely to get stronger later this year as more interest rate cuts move onto the radar for the Bank of England.
Rents increased to £1,390, up 7.5%, in England; £795, up 8.7%, in Wales; and £999, up 5.1%, in Scotland, in the 12 months to April. In Northern Ireland, average rents increased by 7.8% to £843 (7.8%) in the 12 months to February.
In England, private rent increases were highest in the North East (9.4%), and lowest in Yorkshire and The Humber (4.0%).
Bill said:
Rental value growth is still stubbornly high due to robust demand and supply that is falling as more landlords leave the sector. The Renters’ Rights Bill was designed to benefit tenants but the risk is that it has the opposite effect by cutting supply and keeping rents at levels that remain historically high.
Average UK house prices increased by 6.4%, to £271,000 in the year to March 2025, up from 5.5% in the 12 months to February 2025.
— Office for National Statistics (ONS) (@ONS) May 21, 2025
Average UK private rents increased by 7.4% in the year to April 2025, this is down from 7.7% in March 2025.
➡️ https://t.co/9bzGCzHKPV pic.twitter.com/HWFwf8Ss3w
Angela Rayner urged Rachel Reeves to consider a series of wealth tax rises, it has been revealed, in a move that underscores growing unease within the government over the chancellor’s tight spending plans.
A memo sent by the deputy prime minister to the chancellor before March’s spring statement proposed eight potential tax measures worth an estimated £3bn to £4bn a year, including reinstating the pensions lifetime allowance and increasing the corporation tax rate for banks.
The proposals were not adopted, with Reeves opting instead to announce cuts to public spending in March, in line with her self-imposed fiscal rules.
While the memo, obtained by the Daily Telegraph, was framed as a discussion document, it is likely to be seen as Rayner staking out ground for Labour’s left wing within a cabinet increasingly shaped by Starmer-aligned centrists.
Another April inflation spike will add to the Bank of England’s unease, said JPMorgan economist Allan Monks.
He noted that wage growth remains high.
Combined with the BoE’s recent hawkish rhetoric – including Huw Pill’s comments yesterday, but more specifically the three or four hawks in the centre-ground identified in the March minutes – this CPI [consumer prices index] release likely closes the door to a June cut and increases the risk that the BoE will pause in August.
We maintain our August call for now, with plenty of data still to come. We expect the BoE will still be surprised to the downside on GDP and wage growth.
Average annual household bills in the uK have increased by £112 to £5,606 – up from £5,494 last year, according to the comparison site Compare the Market.
The research shows energy, council tax, and water bills have risen by a combined average of £391.
However, the cost of car insurance has fallen by £268, on average, year-on-year. The average cost of home insurance is also down, by £11 year-on-year in April to £212.
The TUC is calling on the Bank of England to stay the course on interest rates.
TUC general secretary Paul Nowak said:
Today’s unwelcome rise in inflation - driven by higher energy and water bills - is painful but not unexpected.
The Bank of England must stay the course and continue to cut interest rates to relieve pressure on households. High rates have already choked growth and hit businesses hard. Lowering them will put more money in people’s pockets and help them spend in their local economies.
The TUC is a federation of 48 trade unions and represents 5.5 million workers.
A £25m post-Brexit border control post in Portsmouth may have to be demolished if the UK government’s deal with the EU removes the need for health and veterinary checks on food imports, according to the port’s director.
Mike Sellers had already spoken out last year about how more than half of the site would never be used because planned checks on EU food and plant products had been pared back since it was designed, leading to the building being called a “white elephant”.
The hi-tech facility at the UK’s second busiest cross-Channel terminal was one of more than 100 border control posts (BCPs) around the country built to government specifications to handle post-Brexit checks on imports subject to sanitary and phytosanitary checks, such as meat, fish, dairy products, fruit and vegetables.
On the trade front, US chip exports controls have been a “failure”, the head of Nvidia, Jensen Huang, told a tech forum on Wednesday, as the Chinese government separately slammed US warnings to other countries against using Chinese tech.
Successive US administrations have imposed restrictions on the sale of hi-tech AI chips to China, in an effort to curb China’s military advancement and protect US dominance of the AI industry. But Huang told the Computex tech forum in Taipei that the controls had instead spurred on Chinese developers.
The local companies are very, very talented and very determined, and the export control gave them the spirit, the energy and the government support to accelerate their development.
I think, all in all, the export control was a failure.
China has a vibrant technology ecosystem, and it’s very important to realise that China has 50% of the world’s AI researchers, and China is incredibly good at software.
Updated
Oasis fans are expected to splash out more than £1bn on the reunion tour including tickets, accommodation, food, drink, outfits and merchandise, according to research that found a quarter of ticket holders would have been happy to spend even more.
The band’s comeback concerts after a 15-year hiatus are expected to be the most popular, and profitable, run of gigs in British history.
Research by Wonderwallets, part of the Barclays Consumer Spend report, estimates £1.06bn will be spent by the 1.4 million fans attending the 17 UK tour dates – more than £757 a person.
However, the excitement around once again being able to see the Mancunian band live has been marred by a scandal over “dynamic” ticket pricing, which led to some fans paying more than £350 for tickets with a face value of £150, and has prompted an investigation by the UK competition watchdog.
Updated
Electrical goods retailer Currys has reported higher profits and a jump in sales, and said it is benefiting from lower interest rates.
The company said in a trading update to the stock market that it expects to report pre-tax profit of around £162m for the year to 3 May, higher than its previous £160m guidance, and 37% higher than a year earlier.
Currys said improving finances reinforced the board’s decision to resume dividends to shareholders.
The retailer – which struck a more gloomy tone in January, when it said it was entering a period of “depressed hiring” – said like-for-like sales growth had accelerated to 4% in the past 17 weeks since the key Christmas trading period. It said it was helped in part by lower interest costs.
Alex Baldock, Currys chief executive, said:
We finished another year of strengthening performance on a high note with encouraging momentum and accelerating sales growth in both the UK and Ireland and the Nordics. In both, we’ve grown profits by delivering sales growth, market share gains and gross margin increases.
The company is due to report its full-year results in early July.
M&S expects cyber-attack to last into July and cost £300m in lost profits
Marks & Spencer has warned that its recent cyber-attack will disrupt its online business into July, and calculated a £300m hit to profits this year.
The number was revealed as M&S said pre-tax profits rose by a better-than-expected 22% to £876m in the year to 30 March, shortly before the attack, as sales rose 6% to £13.9bn.
The company said it had more than £400m of net funds in the bank so that it had been “in the best financial health we’ve been in 30 years” before the hackers hit and the expected financial impact would be significantly mitigated by insurance, cost reductions and other actions.
Analysts said they expected to cut profit forecasts for this year by at least 10% but the City is expecting at least £100m of the profits hit to be pulled back from insurance and other measures.
Thames Water and Anglian Water face 53 criminal investigations over sewage
As water bills including sewerage rise across the country – the most since at least 1988 –two of Britain’s biggest water companies, Thames Water and Anglian Water, face more than 50 criminal investigations between them as part of a crackdown on sewage dumping, according to the government .
The utilities were subject to the bulk of a record 81 investigations into water companies between last July’s general election and March 2025, according to new data.
New powers to claw back the costs of the Environment Agency investigations will be used, meaning the “polluter will pay”, sources told the Guardian.
This could prove very costly for Thames, the heavily indebted supplier that topped the charts of active investigations at 31 and will probably have to fund the majority of them.
Britain’s biggest water company, which recently came within five weeks of running out of funds, attempted to persuade the water regulator to let it off hundreds of millions of pounds of fines. Significant further costs could risk tipping it into a special administration, a form of nationalisation.
Thames Water is rushing to find a buyer willing to inject cash as it teeters on the brink of temporary nationalisation. The company, which has 16 million customers and 8,000 employees, is labouring under £20bn of debt.
The UK inflation numbers aren’t as bad as they look, said ING’s developed markets economists James Smith.
Services inflation, which rose much further than expected, was driven by a big change in road tax and the timing of Easter. It should fall back from April’s 5.4% figure to the 4.5% area this summer, keeping the Bank of England on track for quarterly rate cuts through this year and into 2026.
Services is the part of the inflation basket that the Bank of England cares most about, and this was a much larger pick-up than economists or the Bank had expected.
But, that jump doesn’t look as problematic as at first glance once you drill into it. Smith calculates that half of that change was solely down to the rise in road tax. That will stick around for the next 12 months, then drop out of the annual comparison. The Bank of England will almost certainly ignore this, as it does with changes in other taxes like VAT, he said.
Aside from road tax, the remainder of the increase in services inflation can be almost entirely accounted for by air fares and package holidays, both of which were affected by the timing of Easter.
Away from road tax and travel, several other key areas saw further disinflation in April. Restaurants/cafes, medical care services and rents all saw their respective rates of annual inflation fall.
More generally, surveys show that pricing power is ebbing away. We expect services inflation to fall back to the 4.5% area this summer and lower still in 2026, when things like road tax drop out of the annual comparison.
That’s still too high for many of the Bank of England’s rate-setters, which is why we have long argued policymakers are unlikely to speed up the pace of easing this year. But we think an August cut is still highly likely, and the quarterly pace of rate cuts can continue through this year and into 2026.
Core inflation, which strips out volatile food and energy costs, rose more than expected to 3.8% on a yearly basis, from 3.4% in March. Services inflation jumped to 5.4% from 4.7%.
Monica George Michail, associate economist at the National Institute of Economic and Social Research, a think tank, said inflation is likely to stay higher in the coming months. She expects just one further interest rate cut this year.
⚡️Our reaction to the latest #inflation figures is out now⚡️@MichailMonica @RoyalEconSoc pic.twitter.com/GYyUsnUB6i
— National Institute of Economic and Social Research (@NIESRorg) May 21, 2025
Updated
The Joseph Rowntree Foundation has described the jump in inflation as “alarming” that have “really hit home” for struggling households, with more people already relying on food banks.
JRF economist Maudie Johnson Hunter said:
Alarming bill rises in April, such as water, energy and council tax, have really hit home for families already struggling to make ends meet. The Bank of England central projection is for the inflation rate to stay over 3% for the rest of 2025, meaning many of these core bill increases will remain baked into higher household outgoings, as incomes continue to fall short of essential costs.
Figures out today from Trussell also show that 2.9m emergency food parcels were provided across the UK between April 2024 and March 2025 to people in hardship, up by just over 50% in the last five years.
The government needs to take action to ensure their commitment to improving living standards moves from rhetoric into reality for households. Our research shows real incomes are currently projected to be lower in 2029 than they are today, which would be a damning legacy for a government who came to power promising to end the need for food banks.
Food has also become more expensive, with prices up by 3.4% year on year in April, up from 3% in March. The UK statistics office said the upward effects came from meat, mineral water, bread and cereals, and sugar and jam. The downward effects came from vegetables, and from milk, cheese and eggs.
Meanwhile, clothes prices fell by 0.4% in the 12 months to April, compared with a rise of 1.1% in March.
This was mainly because of lower prices for women’s clothes and shoes and garments for infants, as many more items were on sale than usual. The statistics office said it is possible that the larger proportion of items on sale was a consequence of index day coinciding with the Easter holidays in April this year, while occurring after the Easter holidays last year.
Luke Bartholomew, deputy chief conomist at the fund manager Aberdeen, echoed those comments, saying:
Inflation was always going to jump higher today given movements in energy and other administered prices, but the reported increase is bigger than expected. In particular, services inflation looks especially strong, which may suggest the various cost shocks such as the increases in national insurance and the living wage are hitting firms and starting to be passed on into final Prices.
Certainly, this will reinforce the concerns voiced by Bank of England chief economist Huw Pill that underlying inflation pressures are sticky and so there is less room for the Bank to cut rates. Nonetheless, we think a quarterly profile of rate cuts remains appropriate, but the chance of the easing cycle speeding up any time soon has fallen.
Pill said yesterday that the quarterly pace of rate cuts had been “too rapid”.
Updated
Awful April inflation surge casts doubt on summer rate cut
The “Awful April” inflation surge has cast doubt on an interest rate cut in the summer, according to Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.
This inflation surge highlights the brutal hit to household and business finances from April’s multitude of eyewatering bill rises and tax hikes, with higher energy costs in particular driving an uncomfortably large increase in the headline rate.
Rising services and core inflation suggest that the double blow for businesses from the rising National Insurance and National Living Wage has further fuelled underlying price pressures, more than offsetting the downward squeeze from a wilting labour market.
While the aftershocks from ‘awful April’ should keep inflation above 3% for a while, it could start drifting downwards as lower energy bills kick in, assisted by July’s expected fall in Ofgem’s energy price cap.
These figures probably rule out a June rate cut and while policymakers should view April’s spike as a temporary blip, the size of the increase means an August policy loosening is far from a done deal.
Markets see the probability of a rate cut in June at just 6% and a cut is not fully priced in for the August meeting either. Traders are still expecting interest rates to fall to 4% by September, from 4.25% at the moment.
Updated
The chancellor of the exchequer, Rachel Reeves, said:
I am disappointed with these figures because I know cost of living pressures are still weighing down on working people.
We are long way from the double digit inflation we saw under the previous administration, but I’m determined that we go further and faster to put more money in people’s pockets.
That’s why we have increased the minimum wage for millions of working people, frozen fuel duty to protect commuters and struck three trade deals in the past two weeks that will go towards cutting bills.
Here’s our full story on inflation:
Inflation jumped in April by more than expected to 3.5% after dramatic increases in water bills, energy costs and council tax, according to official figures.
A rise in employer national insurance contributions and a boost to the national minimum wage also put pressure on companies to raise prices last month by more than City analysts had forecast.
Calls for deeper interest rate cuts are likely to be rebuffed by the Bank of England after the growth in prices proved to be stronger than financial markets expected.
Officials at the Bank cut interest rates by a quarter point to 4.25% at their last meeting on 8 May but the vote by the nine-member monetary policy committee was split three ways, with two members voting to keep rates on hold while another two supported a half-point reduction.
Updated
Transport costs rose by 3.3% year on year in April, up from 1.2% in March, following a rise in vehicle excise duty – it now applies to old and new electric cars plus some of the rates paid by new petrol and diesel cars doubled.
Airfares rose by 27.5% on the month, up from 6.5% a year ago. This is the second-highest monthly rise for an April since records began. Flights departing in the Easter holidays tend to be more expensive.
Index day occurred during the Easter holidays this year, which made every flight more expensive, while last year, index day occurred after the Easter holidays.
There was a downward effect from motor fuels, which fell by 9.3% year on year in April, compared with a 5.3% annual drop in March. The average price of petrol fell by 3.0 pence per litre between March and April to 134.5 pence per litre, down from 148.1p in April. Diesel prices fell by 3.1p per litre to 141.7p, down from 157.1p a year earlier.
UK inflation rises to 3.5% in April
UK inflation jumped back above 3% in April, pushed up by higher energy and transport costs.
The consumer prices index increased by 3.5% in the 12 months to April, up from 2.6% in March, according to the Office for National Statistics. That’s towards the top end of economists’ forecasts.
The ONS pointed to higher prices for housing and household services, transport, and recreation and culture, while the biggest downward contribution came from clothing and footwear.
Consumer Price Index (CPI) rose by 3.5% in the 12 months to April 2025, up from 2.6% in March 2025.
— Office for National Statistics (ONS) (@ONS) May 21, 2025
Read the full article ➡️ https://t.co/eeQd9l83c7 pic.twitter.com/yzyEv4hdEL
The main culprit was rising energy prices.
The regulator Ofgem estimated that for an average household paying by direct debit for dual fuel, the increases equate to £1,849, a rise of £111 over the course of a year.
Prices of electricity, gas and other fuels rose by 6.7% in the year to April. Gas prices rose by 7.5% on the month, compared with a fall of 15.8% a year ago. Electricity prices rose by 2.9%, compared with a fall of 10.2% a year ago.
Prices of water and sewerage rose by 26.1% last month, against a rise of 8.1% a year ago. This is the largest rise since at least February 1988.
Updated
Dollar extends two-day slide amid Trump tax bill, G7 currency talks
The US dollar has fallen, extending a two-day slide against other major currencies, as Donald Trump pressured Republicans to back his sweeping tax bill.
The US president visited the Capitol to persuade lawmakers to support what is known as the One Big Beautiful Bill Act.
Traders are also cautious ahead of the Group of Seven finance minister talks in Canada, where US officials could angle for a weaker dollar.
The greenback is down by 0.5% against a basket of major peers.
Goldman Sachs economist James Moberly is predicting a rise in UK headline inflation to 3.5%. He explained:
We expect services inflation to rise to 5.1% (from 4.7% in March), with the increase driven by firms passing through additional costs from the hike in employer national insurance contributions (NICs), a significant Easter effect on airfares, and larger price resets for sewerage bills, vehicle excise duty, and some telecoms services. Our forecast is 10bp above the Bank of England’s projection.
A significant increase in water prices is likely to raise core goods inflation to 1.53% (from 1.11% in March). This implies that core inflation will rise to 3.79% (from 3.38% in March), broadly in line with the level implied by the BoE’s forecasts. We also see strength in non-core components; food retailers are particularly exposed to the impact of the employer NICs change, while energy inflation is set to rise given a 6.4% increase in the Ofgem price cap and strong base effects.
What does this mean for interest rates? Moberly said:
A firm services and headline CPI print would further raise the likelihood that the monetary policy committee pauses in June. But with the increase in inflation largely driven by temporary factors, a stronger print would not necessarily be an indication of greater services pressures ahead; in fact, we see services inflation falling back below the BoE’s projections later in the year. Given the restrictive policy stance, notable labour market loosening, a likely deceleration in pay growth, and a softer near-term demand outlook, we therefore continue to expect the Bank to accelerate the pace of cuts in the second half.
Introduction: UK inflation forecast to have jumped in April on back of higher household bills
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Inflation in the UK is expected to have risen back above 3% last month, reflecting higher household bills.
The consumer prices index is forecast to have risen by 3.3% in the 12 months to April, up from 2.6% in March, according to economists polled by Reuters. The figures from the Office for National Statistics are due at 7am BST.
There is an unusually wide range of forecasts, from 2.7% to 3.6%. The core rate of inflation, which strips out volatile energy and food costs, is predicted to have risen to 3.6% from 3.4%.
Many household bills go up in April every year, from council tax to energy and water, but this year the picture is complicated by the impact of higher national insurance contributions for employers, and by the late timing of Easter. This year, people talked about “Awful April”.
Julien Lafargue, chief market strategist at Barclays Private Bank, said:
April is likely to show UK headline inflation jump back up above 3%. This is driven by a number of one-off adjustments including the new National Insurance contributions and the increased National Living Wage. There is also the impact of Easter, which fell squarely in April in 2025 but was in March in 2024, as well as the lovely weather that the UK has experienced in recent weeks.
All this will make for a relatively noisy report at a time when the Bank of England is eagerly trying to figure what to do next. However, beyond the short-term distortions, we believe the overall direction of travel for UK inflation is lower. This should provide the central bank with room to consider at least a couple more interest rate cuts this year, supporting favourable economic conditions going forward.
As Rachel Reeves travels to Banff in Canada for a two-day summit of the G7 finance ministers and central bank governors, she said:
This government is laser-focused on delivering for the British people. That’s why in the past two weeks we have struck three major deals with the US, EU and India that will kickstart economic growth and put more money in people’s pockets as part of our plan for change.
The world is changing, but we have shown in recent weeks that Britain is a strong economy that can navigate that change and we are once again a nation that is open for business.
The UK government has been boosted by three trade deals struck within the last fortnight – with the US, the European Union and India.
The chancellor is expected to meet with the US treasury secretary, Scott Bessent, for the first time since the US-UK trade deal (which, unlike the free trade agreement with India, is not a full trade deal). The UK treasury said it paves the way for further negotiations on tariffs to secure benefits across our economy – such as a future technology partnership between the two countries.
Reeves is also due to meet Canada’s finance minister, François-Philippe Champagne, for the first time since the Canadian election, with the chancellor welcoming Canada’s leadership during its G7 presidency in areas like tackling financial crime and supporting the strong ties between the UK and Canada on trade and economic security.
The Agenda
7am BST: UK inflation for April
G7 two-day meeting of finance ministers and central bank governors in Canada
Updated
