UK inflation increased for the first time in five months over the Christmas period, driven by higher tobacco prices following tax rises and a sharp jump in airfares, according to official figures.
Data published on Wednesday by the Office for National Statistics (ONS) showed consumer price inflation climbed to 3.4% in December, up from 3.2% in November and above economists’ expectations. The rise marks the first increase in inflation since July 2025 and keeps price growth well above the Bank of England’s 2% target.
When Labour took office in July 2024, inflation stood at 2.2%. The ONS said the increase in December was largely due to higher tobacco prices, alongside rising airfares and food costs. Across her October 2024 and November 2025 budgets, Chancellor Rachel Reeves raised duties on cigarettes and other tobacco products and introduced a new tax on vapes.
Alcohol and tobacco inflation rose to 5.2% in December from 4% the previous month, while airfares jumped 28.6% year-on-year. Food prices edged up to 4.5% from 4.2%, with bread and cereals among the largest contributors.
Paul Dales, chief UK economist at Capital Economics, said the timing of the Budget played a key role. “The later-than-usual Budget on November 26 meant that the rise in tobacco duties was only captured in the ONS’s December survey,” he explained. Grant Fitzner, chief economist at the ONS, said the increase was also influenced by the seasonal spike in airfares during Christmas and New Year travel, although weaker inflation in recreational and cultural activities offset some of the rise.
The inflation uptick comes shortly after the ONS reported unemployment remained at 5.1%, a near five-year high, while economic output grew 0.3% in November, exceeding expectations.
Responding to the figures, Reeves said the government’s “number one focus is to cut the cost of living” and added that “this is the year that Britain turns a corner.” She made the comments while attending the World Economic Forum in Davos, Switzerland.
Bank of England economists expect the inflation rise to be temporary, predicting price growth will return toward the 2% target by spring as household energy bills decline. Financial markets are pricing in two interest rate cuts this year, which would reduce Bank rate to 3.25% from 3.75%, following four reductions in 2025.
Nicolas Crittenden, associate economist at the National Institute of Economic and Social Research, said the increase does not signal persistent inflationary pressure. “Higher tobacco duty and airlines raising prices for festive travellers are the main drivers of this minor rise and do not indicate permanent price increases across the wider economy,” he said.
Services inflation, a measure of domestically generated price pressures, rose to 4.5% in December from 4.4%, while core inflation, which excludes volatile food and energy prices, remained unchanged at 3.2%.
