The rate of inflation hit a much lower than expected 3.2% last month, according to official figures which should lock in an interest rate cut by the Bank of England on Thursday.

The Office for National Statistics (ONS) reported an easing in the pace of the main consumer prices index measure from the 3.6% annual rate seen in October.

The main downwards pressure came from food costs amid a supermarket price war to secure custom ahead of the core Christmas season.

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ONS chief economist Grant Fitzner noted decreases in the prices paid for cakes, biscuits and breakfast cereals in particular.

“Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago”, he wrote.

“The fall in the price of women’s clothing was another downward driver.

“The increase in the cost of goods leaving factories slowed, driven by lower food inflation, while the annual cost of raw materials for businesses continued to rise.”

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The great chocolate price rise explained

The data marked further downwards progress for the headline rate after a spike this year which economists have partly attributed to higher employment costs, imposed after the government’s first budget, being passed on to consumers.

This price wave has muddied the waters over the pace of interest rate reductions by the Bank, which has wanted to see more evidence that inflation is not being further stoked by factors including strong wage growth.

It will be encouraged by better than expected slowdowns in other closely-watched inflation measures which strip out volatile elements, such as food and energy, as well as services inflation.

Recent data has also shown intensifying weakness in the labour market, with the unemployment rate surging by a percentage point to 5.1% since Labour took office.

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Separate ONS figures have also found that the economy contracted for two consecutive months in the run-up to Rachel Reeves’s second budget.

London Stock Exchange Group Data shows more than 90% of financial market participants are expecting the Bank to agree a rate cut to 3.75% – the lowest level in almost three years – from 4%.

The inflation data will come as a relief to the chancellor after a tough few months for her politically given the wider economic data and backlash over the Treasury’s handling of the lead up to the budget.

Ms Reeves said: “I know families across Britain who are worried about bills will welcome this fall in inflation.

“Getting bills down is my top priority. That is why I froze rail fares and prescription fees and cut £150 off average energy bills at the budget this year.

“The Bank of England agree this will help cut prices and expect inflation to fall faster next year as a result.”

You’ve doubtless heard of the National Grid, the network of pylons and electricity infrastructure ensuring the country is supplied with power. You’re probably aware that there is a similar national network of gas pipelines sending methane into millions of our boilers.

But far fewer people, even among the infrastructure cognoscenti, are even faintly familiar with the UK Ethylene Pipeline System. Yet this pipeline network, obscure as it might be, is one of the critical parts of Britain’s industrial infrastructure. And it’s also a useful clue to help explain why the government has just announced it’s spending more than £120m to bail out the chemical plant at Grangemouth in Scotland.

Ethylene is one of those precursor chemicals essential for the manufacture of all sorts of everyday products. React it with terephthalic acid and you end up with polyester. Combine it with chlorine and you end up with PVC. And when you polymerise ethylene itself you end up with polyethylene – the most important plastic in the world.

Why Grangemouth matters

Ethylene is, in short, a very big deal. Hence, why, many years ago, a pipeline was built to ensure Britain’s various chemical plants would have a reliable supply of the stuff. The pipes connected the key nodes in Britain’s chemicals infrastructure: the plants in the north of Cheshire, which derived chemicals from salt, the vast Wilton petrochemical plant in Teesside and, up in Scotland, the most important point in the network – Grangemouth.

The refinery would suck in oil and gas from the North Sea and turn it into ethane, which it would then “crack”, an energy-hungry process that involves heating it up to phenomenally high temperatures. Some of that ethylene would be used on site, but large volumes would also be sent down the pipeline. It would be pumped down to Runcorn, where the old ICI chlor-alkali plant, now owned by INEOS, would use it to make PVC. It would be sent to Wilton, where it would be turned into polyethylene and polyester.

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That’s the first important thing to grasp about this network – it is essential for the operation of a whole series of plants, many of them run by entirely different companies.

The second key thing to note is that, after the closure of the cracker at Wilton (now owned by Saudi company Sabic) and the ExxonMobil plant at Mossmorran in Fife, Grangemouth is the last plant standing. While the refinery no longer uses North Sea oil and gas, instead shipping in ethane from the US, it still makes its own ethylene.

So when INEOS began consulting on plans to close that ethylene cracker, officials down south in Westminster began to panic. The problem wasn’t just the 500 or so jobs that might have been lost in Grangemouth. It was the domino effect that would feed throughout the sector. All of a sudden, all those plants at the other ends of the pipeline would be affected too. In practice, the closure might have eventuated in more than a thousand job losses – maybe more.

What’s happening now?

All of which helps explain the news today – that the Department for Business and Trade is putting more than £120m of taxpayer money into the site. The bailout (it’s hard to see it as anything but) is not the first. The government has also put hundreds of millions of pounds of taxpayer money into British Steel, which it quasi-nationalised earlier this year, not to mention extra cash into Tata Steel at Port Talbot and loan guarantees to help Jaguar Land Rover after it faced an unprecedented cyber attack.

But while this package will undoubtedly provide Christmas cheer here in Grangemouth today, the government is left facing two distinct problems.

Reactive rather than strategic

The first is that for all that the chancellor and business secretary (who are themselves planning to visit Grangemouth today) are keen to pitch this latest move as a coherent part of their industrial strategy, it’s hard not to see it as something else. Far from appearing strategic, instead they seem reactive. To the extent that they have a coherent industrial strategy, it mostly seems to involve forking out public money when a given plant is close to closure. If they weren’t already, Britain’s industrialists will today be wondering to themselves: what would it take to get ourselves some of this money in future?

The crisis continues

The second issue is that the Grangemouth bailout is very unlikely to end the crisis spreading across Britain’s chemicals sector. A series of plants – some prominent, others less so – have closed in the past few years. The chemicals sector – once one of the most important in the economy – has seen its economic output drop by more than 20% in the past three years alone.

This is not just a UK-specific story. Something similar is happening across much of Europe. But for many chemicals companies, it simply doesn’t add up to invest and build in the UK any more – a product in part of regulations and in part of high energy costs. In short, this story isn’t over yet. There will be more twists and turns to come.

Britain loves chocolate.

We’re estimated to consume 8.2kg each every year, a good chunk of it at Christmas, but the cost of that everyday luxury habit has been rising fast.

Whitakers have been making chocolate in Skipton in north Yorkshire for 135 years, but they have never experienced price pressures as extreme as those in the last five.

“We buy liquid chocolate and since 2023, the price of our chocolate has doubled,” explains William Whitaker, the real-life Willy Wonka and the fourth generation of the family to run the business.

“It could have been worse. If we hadn’t been contracted [with a supplier], it would have trebled.

“That represents a £5,000 per-tonne increase, and we use a thousand tonnes a year. And we only sell £12-£13m of product, so it’s a massive effect.”

Whitakers makes 10 million pieces of chocolate a week in a factory on the much-expanded site of the original bakery where the business began.

Automated production lines snake through the site moulding, cutting, cooling, coating and wrapping a relentless procession of fondants, cremes, crisps and pure chocolate products for customers, including own-brand retail, supermarkets, and the catering trade.

Steepest inflation in the business

All of them have faced price increases as Whitakers has grappled with some of the steepest inflation in the food business.

Cocoa prices have soared in the last two years, largely because of a succession of poor cocoa harvests in West Africa, where Ghana and the Ivory Coast produce around two-thirds of global supply.

A combination of drought and crop disease cut global output by around 14% last year, pushing consumer prices in the other direction, with chocolate inflation passing 17% in the UK in October.

Skimpflation and shrinkflation

Some major brands have responded by cutting the chocolate content of products – “skimpflation” – or charging more for less – “shrinkflation”.

Household-name brands including Penguin and Club have cut the cocoa and milk solid content so far they can no longer be classified as chocolate, and are marketed instead as “chocolate-flavour”.

Whitakers have stuck to their recipes and product sizes, choosing to pass price increases on to customers while adapting products to the new market conditions.

“Not only are major brands putting up prices over 20%, sometimes 40%, they’ve also reduced the size of their pieces and sometimes the ingredients,” says William Whitaker.

“We haven’t done any of that. We knew that long-term, the market will fall again, and that happier days will return.

“We’ve introduced new products where we’ve used chocolate as a coating rather than a solid chocolate because the centre, which is sugar-based, is cheaper than the chocolate.

“We’ve got a big product range of fondant creams, and others like gingers and Brazil nuts, where we’re using that chocolate as a coating.”

A deluge of price rises

Brazil nuts have enjoyed their own spike in price, more than doubling to £15,000 a tonne at one stage.

On top of commodity prices determined by markets beyond their control, Whitakers face the same inflationary pressures as other UK businesses.

“We’ve had the minimum wage increasing every year, we had the national insurance rise last year, and sort of hidden a little bit in this budget is a business rate increase.

“This is a small business, we turn over £12m, but our rates will go up nearly £100,000 next year before any other costs.

“If you add up all the cocoa and all the other cost increases in 2024 and 2025, it’s nearly £3m of cost increases we’ve had to bear. Some of that is returning to a little normality. It does test the relevance of what you do.”