Over the past few years, the United Kingdom’s inflation has been concerning economists and citizens alike. Inflation is defined as an increase in a product’s price over time, and is typically measured by the percentage increase. For instance, if a gallon of water costs £5, but costs £5.10 the following year, the annual water inflation would be 10 percent. This notion is affecting the UK majorly, as the prices of numerous groceries, gas, and other products have been rapidly increasing. Prices rose by 3.8 percent during the year to August, corresponding to the rate recorded in July. The Bank of England has been adjusting interest rates up and down to keep inflation in check, cutting rates five times since August 2024. The July and August stats are the highest to be recorded since January 2024 – inflation stays comfortably below the 11.1% spike of October 2022. This was the highest rate for 40 years.
Inflation surged in 2022 due to increased demand for oil and gas following the COVID-19 pandemic, and energy prices spiked amid Russia’s invasion of Ukraine. In the months leading up to August, food and non-alcoholic beverage inflation rose 5.1 percent, and since then, prices have grown for vegetables, dairy, and shellfish. If the Bank of England continues cutting interest rates once every three months, as it’s done since August 2024, then it will make a deeper cut at the next policy meeting to take place this November. The Labour government, which is declining in opinion polls all while having won a landslide election victory last year, hopes the economy will pick up steam. They hope that further interest rate reductions will be delivered in the coming year; however, Treasury chief Rachel Reeves has something else to say. Reeves is expected by many to increase taxes again within the budget, which is sure to send the British economy reeling further.
In April 2024, 72% of adults in Great Britain reported an increase in their cost of living compared to the previous month. 92% stated it was because food shopping prices have increased, and 80% percent claim that gas and electricity bills were the main culprit. Incomes suffered falls in 2022-2023, with the median income for households in the lowest 10% falling 6.6% during this time. In April 2025, 22% of adults said that they were forced to borrow more money or use more credit than usual. 23% of adults told the Office for National Statistics (ONS) that they couldn’t afford an unexpected, however necessary expense of £850. Interest rate increases between December 2021 and December 2023 have likely caused more than 300,000 people with mortgages to be pushed into relative poverty after housing costs.
The United Kingdom’s struggle with inflation has been profound. The future of the country’s economy rests in the hands of its banks and government, whose next moves are not fully predictable.
Written by Alexandra Kwitkowski
