UK inflation hits 15-month high as utility bills soar
The Consumer Prices Index soared to 3.5 percent last month, up from 2.6 percent in March, the Office for National Statistics said in a statement. Analysts' consensus forecast had been for a jump to 3.3 percent.
At 3.5 percent, the headline rate was the highest since the beginning of 2024, the ONS noted.
"I am disappointed with these figures because I know cost of living pressures are still weighing down on working people," finance minister Rachel Reeves said in a statement.
UK regulators allowed private companies to hike household bills from April, taking into account movements in oil and gas markets and indebted water providers.
"Significant increases in household bills caused inflation to climb steeply," ONS acting director general, Grant Fitzner, said in a statement.
"Gas and electricity bills rose... compared with sharp falls at the same time last year."
He noted that "water and sewerage bills also rose strongly... as did vehicle excise duty, which all pushed the headline rate up to its highest level since the beginning of last year".
Energy bills are expected to drop from July, however, following recent heavy falls to oil prices in the wake of US President Donald Trump's tariffs blitz, according to analysts.
Businesses were additionally hit in April by a tax hike and rise to the minimum wage, which both took effect last month having been introduced by the Labour government following its July election victory that ended 14 years of Conservative rule.
Tory spokesman on the economy, Mel Stride, blamed "Labour's economic mismanagement" for the surge to inflation.
"Families are paying the price for the Labour... choices," he added, as businesses pass on higher costs to consumers.
Bank of England
Analysts said the latest data could see the Bank of England ease the pace at which it has been cutting interest rates in recent months.
"The BoE's next move is far from straightforward," noted Richard Flax, chief investment officer at wealth manager Moneyfarm.
"The central bank is likely to remain cautious, potentially delaying rate cuts until there's clearer evidence that inflationary momentum is genuinely easing."
The BoE earlier this month cut its key interest rate by a quarter point to 4.25 percent as the threat of US tariffs starts to weigh on economic growth.
It followed three reductions spread over the previous eight months.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
France 24
4 days ago
- France 24
UK economy shrinks in April as US tariffs kick in
Gross domestic product contracted 0.3 percent in the month, compared to 0.2 percent growth in March, the Office for National Statistics (ONS) said in a statement. Analysts' consensus had been for a GDP contraction of 0.1 percent in April. Exports of British goods to the United States fell by a record £2 billion ($2.7 billion) the same month, the ONS revealed, following the introduction of Trump's tariffs onslaught. The data comes one day after Prime Minister Keir Starmer's Labour government laid out its priorities for the coming years, hoping that changes to day-to-day spending amounts and longer-term investment will spur Britain's sluggish economy. 'Clearly disappointing' Finance minister Rachel Reeves injected the ailing National Health Service with billions of pounds and pumped funds into defence and housing, while making cuts to other departments. Reeves said Thursday's figures were "clearly disappointing" but insisted that her spending plans would deliver growth for Britain. Paul Dales, chief UK economist at research group Capital Economics, noted that the economy faced "subdued overseas demand and domestic businesses cutting back on spending to compensate for the rise in costs driven by April's increase in taxes". Following Labour's return to power last July, following years of Conservative rule, Reeves announced a tax rise for UK businesses which entered force in April. Official data this week showed that the hike had contributed to a small rise in Britain's unemployment rate and slowdown to growth in average wages. Record drop Britain's economy had expanded by 0.7 percent in the first three months of the year. "With the economy now weakening, we can expect to see concerns around further tax rises increase as we near the Autumn Budget -- which is likely to weigh on growth even more," said Lindsay James, investment strategist at Quilter. The latest data follows also the introduction of a baseline 10-percent tariff imposed on the UK and other countries by Trump at the start of April. The UK and US have since struck a trade agreement that cuts tariffs on British cars and scraps them on steel and aluminium. Britain in return has agreed to open up its markets to US beef and other American farm goods. But the UK remains subject to a 10-percent tariff on most goods exported to the United States. Decreases in exports to the United States in April were seen "across most types of goods, following the recent introduction of tariffs", said ONS director of economic statistics, Liz McKeown. Machinery and transport equipment, including cars, took a notable hit, after four months of consecutive increases for exports of British goods to the US. Official data earlier this year showed trade in goods between the UK and US remained balanced in 2024. Britain imported £57.1 billion ($77 billion) worth of American goods last year and exported products worth a total of £59.3 billion.
Euronews
4 days ago
- Euronews
UK economy contracts sharply in April: Will the BoE respond?
Britain's economic recovery suffered a setback in April, with gross domestic product (GDP) shrinking by 0.3% on a monthly basis, marking the steepest contraction since October 2023, according to data released by the Office for National Statistics (ONS) on Thursday. The contraction, which exceeded market expectations of a 0.1% fall, has renewed concerns over the UK economy's resilience and intensified pressure on both Downing Street and the Bank of England (BoE)'s policy stance. The April downturn followed a modest 0.2% expansion in March and comes amid a broader backdrop of weakening labour market data and fading consumer momentum. The services sector, which accounts for around 80% of UK economic output, was the primary drag in April, declining by 0.4%. Within services, the professional, scientific and technical activities subsector posted a significant fall of 2.4%. This contraction was driven mainly by a 10.2% plunge in legal activities, attributed in part to the impact of changes to Stamp Duty Land Tax thresholds in England and Northern Ireland. The tax change prompted homebuyers to bring forward purchases to March, resulting in a sharp drop in related services, such as conveyancing and estate agency work, in April. Advertising and market research also contributed negatively to GDP, with output down 3.4%, while growth in scientific research and development (up 6.7%) provided a partial offset. The wholesale and retail trade and repair of motor vehicles and motorcycles subsector also weighed on GDP, declining by 1.2% in April after a 0.9% expansion in March. Production output fell by 0.6% in April, with manufacturing production sliding 0.9% — adding to a 0.8% fall in the previous month. Overall industrial production contracted by 0.6%, coming in weaker than the 0.5% decline expected by analysts. Despite a rebound in construction output, which rose 0.9% month-on-month, it was not enough to counterbalance the broader economic dip. The downturn in GDP comes on the heels of deteriorating labour market data released earlier this week. The number of payrolled employees fell by 109,000 in May, the seventh consecutive monthly decline and the sharpest drop since May 2020. The total stood at 30.2 million, a 0.4% monthly fall. The unemployment rate ticked up to 4.6% in the three months to April, in line with expectations, while wage growth softened. Regular pay excluding bonuses increased by 5.2% year-on-year — the slowest pace in seven months and below the 5.4% forecast. Despite the mounting economic headwinds, the BoE is widely expected to leave interest rates unchanged at 4.25% at its upcoming meeting next week. However, traders have increased their bets on a rate cut in August, anticipating a 0.25 percentage point reduction as the economy shows further signs of cooling. Overall, money markets are currently pricing two interest rate cuts of cumulative 50 basis points by the BoE this year. Sterling came under pressure following the GDP release, with the euro rising to 0.85 pounds — the highest level in over a month during morning trading. UK government bond yields extended their weekly declines. The yield on the two-year gilt fell to 3.90%, the lowest since early May, while the ten-year yield slipped to 4.53%. Equity markets, however, remained broadly resilient. The FTSE 100 held steady around 8,860 points, just shy of Wednesday's all-time high of 8,885. Among the notable movers, Halma plc surged over 8% on the back of strong corporate results. BP also gained 1.8%, buoyed by higher oil prices following the announcement of a trade agreement between the United States and China. On the downside, Intermediate Capital Group and EasyJet dropped 4.1% and 2.6%, respectively. US President Donald Trump told reporters on Wednesday that he would send letters to trading partners in the next week or two, outlining unilateral tariff rates. 'We're going to be sending letters out in about a week and a half, two weeks, to countries, telling them what the deal is,' Trump said at the John F. Kennedy Center for the Performing Arts in Washington. 'At a certain point, we're just going to send letters out. And I think you understand that, saying this is the deal, you can take it or leave it,' he added. This would put Trump ahead of his tariff deadline, as the president previously paused so-called 'reciprocal' duties for 90 days until 8 July. The higher rates are set to kick in on the 9th. Trump told reporters at the Kennedy Center that a delay to the deadline is unlikely, although US Treasury Secretary Scott Bessent previously suggested there may be some flexibility. "It is highly likely that those countries - or trading blocs as is the case with the EU - who are negotiating in good faith, we will roll the date forward to continue the good-faith negotiations," Bessent told the House Ways and Means Committee. "If someone is not negotiating, then we will not." The US has thus far only managed to secure a trade framework with the UK, as well as clinching a tariff deal with China. Trump was nonetheless upbeat about negotiations on Wednesday. "We're rocking in terms of deals," he said. "We're dealing with quite a few countries and they all want to make a deal with us." Following talks in London, Trump said on Wednesday that magnets and rare earths would be supplied up front by China and that the US would allow Chinese students into its colleges and universities. The president added that a 55% tariff would be applied to Chinese imports. A White House official, who was not authorised to discuss the terms publicly, said the 55% was not an increase on the previous 30% tariff on China because Trump was including other pre-existing import taxes. Specifically, the president was tallying up his 10% baseline tariff, the 20% fentanyl trafficking levy and a 25% pre-existing tariff on China. In May, the US agreed upon a trade framework with the UK, which allows US goods to be fast-tracked through customs and reduces trade barriers on a number of products. The framework lowers US duties on British steel, aluminum and cars, although there are some knots to work out, meaning the specifics of the deal could arrive later than the 9 July deadline. US Commerce Secretary Howard Lutnick said on Wednesday that a deal with the European Union will likely be among the final trade agreements concluded by the United States. 'I'm optimistic that we can get there with Europe. But Europe will be probably [at] the very, very end,' Lutnick told CNBC. In May, Trump threatened a 50% tariff on EU goods coming to the US, although he later said he would hold off on this threat until 9 July. The president originally placed a 20% so-called 'reciprocal' levy on EU goods, but this duty was lifted during the 90-day pause window.
LeMonde
4 days ago
- LeMonde
In the United Kingdom, the Labour government prioritizes defense and healthcare
After a difficult first year at Downing Street, on Wednesday, June 11, Labour Prime Minister Keir Starmer and his Chancellor of the Exchequer Rachel Reeves seized the opportunity of the spending review, which is the allocation of the budget by major spending categories through 2029 , to try to revive their plummeting popularity. The day before, Reeves had laid the groundwork, confirming that she would reverse the very first decision she had made upon taking office in July 2024: eliminating an energy allowance for pensioners. That cut, which has affected 11 million Britons, contributed to Labour's disastrous results in the local elections on May 1, and revealed that the far-right Reform UK party is now the preferred choice among working-class voters. On Wednesday, the Chancellor announced more than £110 billion in investments to fund a new nuclear power plant (Sizewell C, in Suffolk) and to upgrade numerous rail links in central and northern England that had been neglected by previous Conservative governments. The NHS, Britain's iconic public healthcare system, will receive an additional injection of nearly £30 billion per year for its operations. Defense, the third major priority for Starmer's cabinet, will also see its budget rise as planned to 2.6% of the country's gross domestic product (GDP) by April 2027 (an additional £11 billion per year).
