Inflation rises to the highest rate for more than a year – industry reaction

UK inflation rose more than expected to a 15-month high of 3.5 per cent in April, driven by higher household bills, according to the Office for National Statistics (ONS). The rise was up on March’s 2.6 per cent and also higher than the 3.3 per cent figure predicted by analysts

Economists stated the increase was driven by a one-off rise in regulated prices like water and utility bills, which came into force last month.

Grant Fitzner, Acting Director General at the ONS, said “significant increases in household bills caused inflation to climb steeply. Gas and electricity bills rose this month compared with sharp falls at the same time last year due to changes to the Ofgem energy price cap.” 

Commenting on the figures, Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “Inflation is back with a bang: like an unwanted house guest, breaking down the door, emptying the fridge and bleeding you dry. The spike in prices is the biggest we’ve seen since the cost-of-living crisis, and even larger than had been forecast. It demonstrates just how awful April was this year for our pockets. Unfortunately, there’s every sign this unwanted guest could end up sticking around for months.

“Huge hikes in household bills shoulder the bulk of the blame, including the £111 rise in the energy price cap, the £123 rise in water bills and the £109 increase in council tax. Water bills rose faster than any time since 1988 – more than 35 years ago. It means the basic necessities are swallowing more of our monthly budgets than ever. A month earlier, electricity had been down 8.8% in a year and gas 12%. In April electricity was up 4.6% in a year and gas 12.2%.

“Inflation in the cost of transport also drove inflation higher. There was the usual rise in car tax, but a change in the rules also meant the rates for some new petrol and diesel cars doubled, squeezing these drivers even harder.

“Air fares rocketed, some of which was down to higher air passenger duty, but much of it was a consequence of where Easter fell this year. This time around all the measurements were taken during the pricey school holiday period – whereas this time last year prices were measured outside of the break. As a result, we saw the second highest April spike since records began. Easter also forced a big shift in prices for recreation and culture – particularly overseas holidays  –  as businesses hiked prices in this peak period.

“On the flip side, petrol prices put the brakes on inflation to some extent. The average price of both diesel and petrol fell – 3.1p per litre and 3p per litre respectively –  during the month, as concerns about the global economy depressed the oil price and brought savings at the pumps.”

John Phillips, CEO of Just Mortgages and Spicerhaart, said “A rise in inflation was hardly a shock given the fact that April marks the start of the new financial year and brought with it wave of inflationary price hikes – most notably to energy and water bills and as businesses pass on both the rise in national insurance contributions and in the minimum wage.

“The big question is how will this impact the future path of interest rates. What we do know is the central bank has been clear it expected this rise in inflation and knows full well it is likely to creep up further before eventually coming down. The real elephant in the room is the impact of Trump’s tariffs on global economies and international trade which is still unknown. With plenty of uncertainty, it’s likely we could see a pause in June before returning to cuts later in the year.

“Base rate strategy has long been a tug of war between managing inflation and stimulating economic growth. While inflation has risen and is expected to increase, it does feel like the overall momentum is still shifting towards stimulating growth – particularly with the threat of economic uncertainty on the global stage. Borrowers are seizing the opportunities available to them now with significant rate reductions across the market and increasing innovation. Brokers remain busy as an ever-changing market continues to demonstrate the value they can offer in navigating options and securing the best possible deal.”

Simon Webb, Managing Director of capital markets and finance at LiveMore, said “While today’s inflation figures show that price pressures remain, they also highlight the resilience of the UK economy in navigating prolonged volatility. For older borrowers, this environment reinforces the value of tailored financial products that provide stability and flexibility.

“Although a base rate cut may be delayed, the market has already priced in some of this expectation, and many lenders – including LiveMore – continue to offer competitive rates and innovative solutions for the over-50s. We’re seeing growing demand from older homeowners who want to make the most of their property wealth in uncertain times, whether to support retirement, help family members, or simply improve quality of life.

“Inflation may still be a factor, but so is adaptability – and the later life lending market is stepping up to meet that challenge.”

Anna Leach, Chief Economist at the Institute of Directors, said “Inflation has risen sharply in April, a touch more than expected, and driven up by the rise in the Ofgem price cap, changes in other regulated prices (like water bills) and potentially some passthrough to prices following the significant increase in employment costs from the Autumn Budget.

“On balance, inflationary pressures are diminishing due to a combination of weak confidence, heightened uncertainty, lower energy prices, a softening labour market and the appreciation of sterling. Yet the Bank of England remains concerned about persistently high services inflation, along with the rise in expectations for inflation amongst households and businesses which have the potential to influence price and wage setting behaviour. This jump in inflation is not helpful against that backdrop. Whilst we should still see more interest rate cuts this year, today’s data is a timely reminder that significant cuts are not baked in, despite the shock to confidence this year from tariffs.”

Kris Hamer, Director of Insight at the British Retail Consortium, said “Headline inflation accelerated in April as additional costs from rising National Living Wage and Employers’ NI costs filtered through to prices faced by consumers, as well as rising costs of utilities (energy, water and broadband). The jump in labour costs pushed up food inflation, which climbed above 3%. However, there was some good news for furniture and clothing shoppers as prices fell year on year, with retailers offered good promotions on summer apparel and electricals. Even with food prices rising overall, there were still deals to be had, with prices of dairy products such as milk, cheese and eggs falling on the month.“Rising inflation was inevitable following the wave of additional costs hitting employers, and particularly retailers who employ over 3 million people across the country. For months retailers have been warning that rising costs would lead to higher prices. To mitigate this, the government must now find ways to help reduce business costs and regulatory burden. It is imperative that its Employment Rights Bill targets unscrupulous employers and avoids burdening responsible businesses with additional costs which could put retail job numbers into reverse.”

Suren Thiru, ICAEW Economics Director said “The notably positive first quarter is more likely a reflection of temporary factors, such as some businesses bringing forward activity ahead of the original US tariffs taking effect, than the economic reality on the ground.  

“This robust quarterly reading is probably the pinnacle for economic growth this year, with activity likely to slow sharply going forward as tax and tariff rises and global uncertainty bite, despite potential boosts from government and consumer spending.  

“The upbeat first quarter GDP data may delay the next UK interest rate cut by giving those policymakers still fretting over inflation enough reassurance over economic conditions to put off authorising another policy loosening.”