UK inflation increases as cigarettes and petrol drive price rises

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The rate of price rises in the UK increased to 2.6 per cent in November, as a hike in tobacco duty and petrol costs drove inflation higher.

The Office for National Statistics (ONS) announced the latest monthly Consumer Prices Index (CPI) reading on Wednesday, up from 2.3 per cent in October.

The inflation level swung back above the Bank of England’s 2 per cent target in October, largely because of household energy bills being pushed up as the price cap rose.

At the end of October, taxes paid on cigarettes and other tobacco products increased in line with inflation, which is likely to be a major driver of higher inflation last month, according to economists.

Food and alcohol prices have also edged higher ahead of the festive season, and an increase in petrol costs between October and November has added to overall price pressures.

The UK’s services sector, which encompasses everything from hospitality and leisure, to real estate, education and healthcare, has been closely monitored by the Bank of England because of concerns that inflationary pressures have remained more persistent.

The latest inflation data will come after ONS figures showed wage growth rose by more than expected in the three months to October. Earnings growth also outstripped inflation by 3 per cent over the same period, with CPI taken into account.

Sanjay Raja, a senior economist at Deutsche Bank, warned of “pressure building” at the beginning of 2025 as a result of business taxes rising and the increased minimum wage.

He said: “Looking ahead, we continue to see more upward pressure building – particularly within the services basket as the rise in employer national insurance contributions (NICs), the change in employer NICs threshold, and hikes to the national living wage all start to push prices higher around the start of 2025.”

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