UK Inflation Rises to 3.5% in Awful April as Household Bills Soar

Inflation in the UK surged to its highest level in more than a year last month, driven by sharp increases in household bills, according to data from the Office for National Statistics (ONS). In April, inflation climbed to 3.5 per cent annually, up from 2.6 per cent in March and marking the steepest level since January 2024. This figure exceeded analysts’ expectations of 3.3 per cent.

The ONS report highlighted that core inflation, which excludes energy, food, alcohol, and tobacco prices, reached 3.8 per cent, up from 3.4 per cent in March. Meanwhile, services inflation, closely watched by the Bank of England, rose significantly to 5.7 per cent, surpassing the anticipated 5 per cent figure and reflecting price increases across various sectors.

The rise in inflation has been attributed to significant increases in household expenses, including gas, electricity, water, and sewerage bills. Ofgem, the energy regulator, raised the average annual energy cap by 6.4 per cent, bringing it to £1,849. Water bills saw an astonishing rise of 26.1 per cent, the sharpest increase recorded since February 1988. Other notable increases included council tax, broadband, and mobile phone charges, intensifying the financial burden on households.

Rachel Reeves, the Chancellor, expressed disappointment at the figures, acknowledging the ongoing cost of living challenges faced by working people. She stated her commitment to further measures to alleviate pressure, while noting that inflation remains substantially lower than the double-digit peaks observed in late 2022.

The Bank of England has warned of a short-term resurgence in inflation following April’s sharp increase in costs. Analysts now predict inflation will stabilise at 3.5 per cent over the summer. Despite two 0.25 percentage-point interest rate cuts this year, rates currently stand at 4.25 per cent, with the Bank signalling fewer cuts may be implemented in the coming months.

Markets responded to the higher-than-expected inflation figures, as the pound gained 0.5 per cent against the dollar to reach a three-year high above $1.35. The yield on two-year government bonds also rose, reflecting market anticipation that interest rates may remain higher for longer to counter persistent inflationary pressures.

Economists suggest the continued rise in inflation may result from businesses passing higher costs onto consumers. The £25 billion increase in employers’ national insurance contributions and the 6.7 per cent rise in the minimum wage, both effective in April, are seen as contributing factors. Policymakers remain cautious as the struggle to balance inflationary pressures with economic stability continues.