The annual inflation rate in the UK surged to 3.5% in April 2025, up sharply from 2.6% in March and marking the highest level since January 2024. The reading also exceeded market expectations of 3.3%, reinforcing concerns that inflationary pressures remain more persistent than previously anticipated.
UK inflation rate accelerates to 3.5%
The data could complicate the Bank of England’s path toward further monetary easing, especially as headline inflation remains well above the central bank’s 2% target.
The largest upward contribution came from the housing and utilities category, where inflation accelerated significantly to 7.8% from 1.8% in the previous month. This sharp rise was primarily driven by electricity and gas prices, which reversed from deep deflationary territory in March to strong gains in April — electricity prices rose by 4.6% (vs -8.8%), while gas prices surged by 12.2% (vs -12%). These increases were directly linked to the latest revision of the Ofgem energy price cap, which was raised in April to reflect higher wholesale energy costs and infrastructure charges. The move affected millions of households, sharply increasing their monthly utility bills.
Although rents for housing continued to rise at an annual pace of 6.3%, this represented a modest deceleration from March’s 7.2%, providing a small downward contribution to overall inflation. However, this was not enough to offset broader cost increases across other categories.
Sectorial figures
Transport inflation rose to 3.3% from 1.2%, reflecting higher costs associated with the introduction of Vehicle Excise Duty (VED) on electric vehicles — both new and existing — for the first time in April. This policy shift aimed at leveling the tax burden across vehicle types contributed to increased vehicle-related expenses, from registration costs to insurance premiums.
Further upward pressure came from recreation and culture, which saw inflation rise to 3.1% from 2.4%, largely driven by the cost of foreign holidays and leisure activities, both of which remained in high demand during the spring travel season. Food and beverage prices also rose at a faster pace, increasing 3.4% year-on-year compared to 3% in March. Key drivers included higher prices for meat, mineral water, bread and cereals, and sugary items like jam — suggesting ongoing pressure in global agricultural supply chains and domestic production costs.
What put downward pressure
The only significant downward contribution to the headline rate came from clothing and footwear, which saw prices fall by 0.4%, compared to a 1.1% increase the previous month. This decline was largely due to a greater volume of seasonal discounts and promotional sales, especially on spring and summer collections as retailers attempted to clear inventory in anticipation of slower consumer spending.
Altogether, the stronger-than-expected inflation print adds to the argument that the UK economy is still grappling with underlying price rigidity, particularly in services and energy-related sectors. With core inflation and services inflation both running above trend, the Bank of England may be forced to adopt a more cautious stance going forward, especially as wage growth and labor market resilience continue to support consumer demand. Market pricing has already begun to reflect this shift, with investors now expecting fewer rate cuts by year-end than previously anticipated.
