As the festive season approached, UK inflation saw an unexpected uptick in December, driven by a combination of higher tobacco duties and increased transportation costs, according to the latest figures from the Office for National Statistics (ONS).
The Consumer Price Index (CPI) rate of inflation rose to 3.4% in December, up from 3.2% in November. This marks the first time in six months that the headline inflation rate has increased, breaking a trend of stagnation or decline since last summer.
The rise was largely attributed to a 1% jump in alcohol and tobacco prices, following a hike in tobacco duties announced in the autumn budget. Additionally, transport costs climbed by 1.3% on a monthly basis, with the biggest contributor being a 28.6% surge in airfares as demand for holiday travel over the festive period and school breaks fuelled price increases.
Food and non-alcoholic beverage prices also rose by 0.8% between November and December, with items like bread, cereals and vegetables, including potatoes, helping to push up overall costs. The annual inflation rate for this division increased to 4.5% from 4.2% the previous month.
“Inflation ticked up a little in December, driven partly by higher tobacco prices, following recently introduced excise duty increases,” explained Grant Fitzner, chief economist at the ONS. “Air fares 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.”
The latest data comes as the government continues its efforts to tackle the cost-of-living crisis. Chancellor Rachel Reeves has pledged that 2026 will be “the year that Britain turns a corner,” with measures announced in the budget, including £150 off energy bills, a freeze on rail fares and the national minimum and living wage.
“My number one focus is to cut the cost of living,” Reeves said. “Money off bills and into the pockets of working people is my choice. There’s more to do, but this is the year that Britain turns a corner.”
Despite the uptick, the December CPI rate came in slightly below the 3.5% consensus forecast among economists. The ONS noted that the rise was partially offset by a fall in rent inflation and lower prices for a range of recreational and cultural purchases.