UK inflation holds steady at 3.8% as fuel prices offset falling air fares
UK inflation held steady in August, official figures show, maintaining pressure on households as the Bank of England prepares to keep borrowing costs at elevated levels.Figures from the Office for National Statistics (ONS) show the annual rate of inflation as measured by the consumer prices index remained at 3.8% last month, the same level as July and matching the forecasts of City economists.Financial markets are widely predicting that Bank policymakers will keep interest rates on hold at 4% on Thursday amid signs of sustained inflationary pressures at almost twice its official 2% target rate.After sharp increases in the headline rate in recent months, the ONS said various price movements offset each other in August.
The cost of air fares was the main downward driver, while prices rose for petrol and diesel.The cost of hotel accommodation also fell by less than this time last year.Food price inflation climbed for a fifth consecutive month, up from 4.9% in July to 5.1% in August, with small increases in a range of vegetables, cheese and fish items.
The price of chocolate rose by 15.4%, while the cost of beef, butter and coffee also increased sharply.The chancellor, Rachel Reeves, is facing intense scrutiny over Labour’s economic management amid widespread speculation about tax increases in her autumn budget, which is expected on 26 November.Business groups said the chancellor’s 2024 autumn budget measures, including the £25bn increase in employer national insurance contributions, would force them to cut jobs and raise prices.Mel Stride, the shadow chancellor, said: “With borrowing costs hitting a 27-year high, working people and businesses are bracing for even more tax rises to pay for Labour’s mismanagement.
”Reeves said the government was taking action to help households.“I know families are finding it tough and that for many the economy feels stuck.That’s why I’m determined to bring costs down and support people who are facing higher bills.”The Bank forecasts inflation is on track to peak at 4%, with the potential to delay further interest rate cuts.Threadneedle Street has cut borrowing costs five times since summer 2024.
City economists said there were some signs that inflationary pressures were beginning to abate.Inflation for consumer services, which is closely watched by the Bank, slowed to 4.7% from 5% in July.Core inflation, which excludes energy, food and tobacco prices, fell to 3.6% from 3.
8%,Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionInflation has come down from a peak of 11,1% in the second half of 2022, the highest rate in four decades, after Russia’s invasion of Ukraine fuelled an increase in the price of energy and food,Although the headline rate has fallen back, households have come under renewed pressure after a rise in taxes and regulated utility prices in April, including for energy and water,Threadneedle Street has also expressed concern over fast-rising food prices, which hit lower-income households hardest.
Economists say that increasingly extreme weather conditions are pushing up food prices, as the climate emergency causes more droughts and floods, affecting harvests around the world,UK food manufacturers and retailers said government regulations and taxes were also having an effect,Paul Nowak, the general secretary of the Trades Union Congress, urged the Bank to cut rates to ease pressure on workers, arguing that high borrowing costs would have little impact on price increases due to global challenges,“Keeping interest rates high will not bring down these prices – but instead, rates are adding to the pain for families and businesses,” the TUC boss said,Official figures on Tuesday showed the jobs market cooled in July, while economic growth remains weak, adding to pressure on the Bank to consider a cut in rates.
The ONS will provide updated figures for retail sales and the government finances on Friday.However, analysts said concerns remained over stubborn inflation.Martin Sartorius, the principal economist at the CBI business lobby group, said: “The monetary policy committee [MPC] looks set to keep interest rates unchanged tomorrow and, going forward, the MPC faces a delicate balance between signs of a cooling labour market and the risk of price pressures remaining stubbornly high.”UK inflation is running at the highest rate in the G7, outpacing a 2.9% headline rate in the US.
The rate is also significantly above the eurozone’s 2.1%, and flash estimates for France (0.8%) and Germany (2.1%), for August.
Barratt Redrow warns of budget uncertainty affecting property market
Britain’s largest housebuilder Barratt Redrow has warned of a “tough market” and expects little growth in the next 12 months amid uncertainty around property taxes.David Thomas, the executive of the company, which was enlarged by Barratt’s £2.5bn acquisition of Redrow last October, cautioned that “the housing market remains challenging and we anticipate limited growth in 2026”.High mortgage costs have squeezed homebuyers’ budgets. The Bank of England is widely expected to keep its base rate at 4% on Thursday
UK inflation holds steady at 3.8% as fuel prices offset falling air fares
UK inflation held steady in August, official figures show, maintaining pressure on households as the Bank of England prepares to keep borrowing costs at elevated levels.Figures from the Office for National Statistics (ONS) show the annual rate of inflation as measured by the consumer prices index remained at 3.8% last month, the same level as July and matching the forecasts of City economists.Financial markets are widely predicting that Bank policymakers will keep interest rates on hold at 4% on Thursday amid signs of sustained inflationary pressures at almost twice its official 2% target rate.After sharp increases in the headline rate in recent months, the ONS said various price movements offset each other in August
Trump’s tariffs have hurt tea exports to the US, says Fortnum & Mason boss
The boss of upmarket retailer Fortnum & Mason has said Donald Trump’s trade war has hit sales of its luxury tea exports to the US and forced up prices.Tom Athron, the London-based retailer’s chief executive, said Trump’s stricter country of origin rules and the end of the “de minimis” cost exemption for parcels worth less than $800 (£587) had hit customers across the Atlantic.“The American authorities have told us – this is the tea industry in its entirety – that if you’ve got tea from China and India in your tea, then its country of origin [is] China or India, and therefore those enormous tariffs apply,” he told the Financial Times.Trump, who landed in the UK on Tuesday for an unprecedented second state visit for a US president, last month imposed a 50% tariff on imports from India as a punishment for buying Russian oil.And earlier this year, the US administration raised tariffs as high as 145% on Chinese goods as the trade war intensified, before dropping them to 30% in May to facilitate talks between the two trading giants
Bold and ‘brat’: Marks & Spencer bets on womenswear to revive autumn fortunes
After a cyber-attack rained on its summer, Marks & Spencer is banking on fashion to brighten its autumn.A Prada-esque, crystal-embellished, charcoal V-neck cardigan (£46), a faux leather trenchcoat with a price tag of £90 – £6,810 less than the Burberry version – and a £36 short pleated skirt that offers a wearable take on Charli xcx’s “brat” styling will hit shop floors shortly.“We can be bolder because, while we continue to dominate in the over-55s, we’ve got new customers in the 35- to 55-year-old age range,” said Maddy Evans, the brand’s womenswear lead, at a showcase of the new collection in the run-up to London fashion week, which begins on Friday.The store is relying on womenswear, which has been ticking upward in sales and credibility for two years, to lead a bounce back after a devastating cyber-attack that affected M&S from April to August and is predicted to have cost the business £300m in profits.Evans said the retailer was aiming for two-thirds newness in store
UK set on resolving standoff with big pharma, science minister says
The UK is determined to resolve its standoff with the pharmaceutical industry and reverse a 10-year decline in NHS spending on medicines, the science minister has told MPs after a string of drugmakers cancelled projects worth nearly £2bn.Patrick Vallance, a former executive at drugmaker GSK, said the country needed to increase spending on medicines and reverse a decade of declining investment.“We are determined to solve this,” Lord Vallance told the Commons science committee. “This is not something [where] we’re sitting saying let’s watch the decline of the industry. That’s what’s happened for the past 10 years
Jaguar Land Rover extends production shutdown after cyber-attack
Jaguar Land Rover has extended its shutdown on car production, as Britain’s biggest carmaker grapples with the aftermath of a cyber-attack.JLR said on Tuesday it would freeze production until at least next Wednesday, 24 September, as it continues its investigations into the hack, which first emerged earlier this month.The manufacturer said: “We have taken this decision as our forensic investigation of the cyber incident continues, and as we consider the different stages of the controlled restart of our global operations, which will take time.“We are very sorry for the continued disruption this incident is causing and we will continue to update as the investigation progresses.”JLR, which is owned by India’s Tata group, stopped production at its sites after discovering hackers had infiltrated its systems a few weeks ago
France proposes ceiling on value of UK components in €150bn EU defence fund
Plan to slash US steel tariffs shelved hours before Donald Trump’s UK visit
Two British MPs ‘denied entry’ into Israel during official West Bank visit
New headache for Rachel Reeves as OBR expected to lower productivity forecast
MPs give Foreign Office fall guy a mauling over Mandelson | John Crace
Mandelson not given in-depth vetting before appointment, says Foreign Office