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.
When Labour took office in July 2024, inflation stood at 2.2 per cent.
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”.
Some price pressures were offset by weaker inflation in recreational and cultural activities, which put downward pressure on the overall index.
The rise in inflation comes days after the ONS reported that unemployment remained stuck at 5.1 per cent, a near five-year high, although economic output expanded by a faster-than-expected 0.3 per cent in November.
Responding to the data, Reeves said the government’s “number one focus is to cut the cost of living”, adding that “this is the year that Britain turns a corner”. She was speaking from Davos, Switzerland, where she is attending the annual World Economic Forum.
Bank of England economists believe the uptick in inflation will be short-lived, with price growth expected to fall back towards the 2 per cent target by the spring as household energy bills decline. Financial markets are pricing in two interest rate cuts this year, which would take Bank rate to 3.25 per cent from 3.75 per cent, following four reductions in 2025.
Nicolas Crittenden, an associate economist at the National Institute of Economic and Social Research, said the increase did not point to persistent inflationary pressure. “Higher tobacco duty and airlines raising prices for festive travellers are the main drivers of this minor rise and do not indicate permanent price increases across the wider economy,” he said.
Services inflation, a closely watched measure of domestically generated price pressures, rose to 4.5 per cent in December from 4.4 per cent the previous month. Core inflation, which strips out volatile food and energy prices, was unchanged at 3.2 per cent.
