UK inflation rates rise to 3.4% as Britons feel squeeze

UK inflation rose in December to sit at 3.4 per cent, up from 3.2 per cent in November 2025.

The surprise climb was partly due to air fares rising, the Office for National Statistics said, while transport costs and tobacco also contributed.

Prior to December’s numbers, consumer price inflation (CPI) had held at the same rate or fallen for four consecutive readings, starting from July’s 3.8 per cent level.

CPIH, the inflation figures including household costs, rose to 3.6 per cent for the 12 months to December.

ONS chief economist Grant Fitzner explained: “Inflation ticked up a little in December, driven partly by higher tobacco prices, following recently introduced excise duty increases.

“Airfares 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. Rising food costs, particularly for bread and cereals, were also an upward driver.

“These were partially offset by a fall in rents inflation and lower prices for a range of recreational and cultural purchases.

“The annual increase in the prices for goods leaving factories was unchanged this month while the increase in the cost of raw materials for business slowed, driven by lower crude oil prices.”

Chancellor of the Exchequer, Rachel Reeves, said: “My number one focus is to cut the cost of living. At the budget I announced £150 off energy bills, a freeze to rail fares for the first time in 30 years, a freeze to prescription charges for the second year running, and an increase to the national minimum and living wage.

“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.”

In terms of consumers’ money, Derek Sprawling, head of money at savings app Spring, urged people to ensure their savings accounts were earning as high an interest rate as possible.

Having an interest rate higher than the rate of inflation ensures your cash does not lose value, or buying power, over a period of time.

“A rise in inflation tightens the squeeze on cash, and with savings rates already easing from last year’s peaks, the gap can widen quickly,” he said. “Savers should act now, review their rate, move out of low-paying legacy or bonus-ended accounts and check comparison sites for the best rates on the market, but also for their personal circumstances.

“In a high inflation yet reducing rate market, being proactive is the best defence for your hard-earned savings.”

The best savings accounts on the market can still earn up to 4.5 per cent.