Inflation jumps to 3.6% on fuel and food price pressures

Published

2 months ago

July 16, 2025

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The rate of inflation has risen by more than expected on the back of fuel and food price pressures, according to official figures which have prompted accusations of an own goal for the chancellor.

The Office for National Statistics (ONS) reported a 3.6% level for the 12 months to June – a pace not seen since January last year.

That was up from the 3.4% rate seen the previous month. Economists had expected no change.

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ONS acting chief economist Richard Heys said: “Inflation ticked up in June driven mainly by motor fuel prices which fell only slightly, compared with a much larger decrease at this time last year.

“Food price inflation has increased for the third consecutive month to its highest annual rate since February of last year. However, it remains well below the peak seen in early 2023.”

A key driver of food inflation has been meat prices.

Beef, in particular, has shot up in cost – by more than 30% over the past year – according to Association of Independent Meat Suppliers data reported by FarmingUK.

High global demand alongside raised production costs have been blamed.

But Kris Hamer, director of insight at the British Retail Consortium, said: “While inflation has risen steadily over the last year, food inflation has seen a much more pronounced increase.

“Despite fierce competition between retailers, the ongoing impact of the last budget and poor harvests caused by the extreme weather have resulted in prices for consumers rising.”

It marked a clear claim that tax rises imposed on employers by Rachel Reeves from April have helped stoke inflation.

Balwinder Dhoot, director of sustainability and growth at the Food and Drink Federation, said: “The pressure on food and drink manufacturers continues to build. With many key ingredients like chocolate, butter, coffee, beef, and lamb, climbing in price – alongside high energy and labour expenses – these rising costs are gradually making their way into the prices shoppers pay at the tills.”

Chancellor Rachel Reeves said of the data: “I know working people are still struggling with the cost of living. That is why we have already taken action by increasing the national minimum wage for three million workers, rolling out free breakfast clubs in every primary school and extending the £3 bus fare cap.

“But there is more to do and I’m determined we deliver on our Plan for Change to put more money into people’s pockets.”

The wider ONS data is a timely reminder of the squeeze on living standards still being felt by many households – largely since the end of the COVID pandemic and subsequent energy-driven cost of living crisis.

Record rental costs alongside elevated borrowing costs – the latter a result of the Bank of England’s action to help keep a lid on inflation – have added to the burden on family budgets.

Most are still reeling from the effects of high energy bills.

The cost of gas and electricity is among the reasons why the pace of price growth for many goods and services remains above a level the Bank would ideally like to see.

Added to that is the toll placed on finances by wider hikes to bills. April saw those for water, council tax and many other essentials rise at an inflation-busting rate.

The inflation figures, along with employment data due tomorrow, are the last before the Bank of England is due to make its next interest rate decision on 7 August.

The vast majority of financial market participants, and many economists, expect a quarter point cut to 4%.

That forecast is largely based on the fact that wider economic data is suggesting a slowdown in both economic growth and the labour market – twin headaches for a chancellor gunning for growth and juggling hugely squeezed public finances.

Professor Joe Nellis, economic adviser at the advisory firm MHA, said of the ONS data: “This is a reminder that while price rises have slowed from the highs of 2021-23, the battle against inflation is far from over and there is no return to normality yet – especially for many households who are still feeling the squeeze on essentials such as food, energy, and services.

“However, while the Bank of England is expected to take a cautious approach to interest rate policy, we still expect a cut in interest rates when the Monetary Policy Committee next votes on 7th August.

“Despite inflation at 3.6% remaining above the official 2% target, a softening labour market – slowing wage growth and decreasing job vacancies – means that the MPC will predict inflation to begin falling as we head into the new year, justifying the lowering of interest rates.”

UK

Labour deputy leadership: Contest to replace Rayner set to become two-horse race

Published

8 hours ago

September 11, 2025

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Labour deputy leadership: Contest to replace Rayner set to become two-horse race

Labour’s deputy leadership contest is on the brink of becoming a two-horse race between Bridget Phillipson and Lucy Powell, as the other three candidates scramble for nominations.

The official tally from the Parliamentary Labour Party (PLP) on Wednesday night put Ms Phillipson, the education secretary, ahead with 116 nominations.

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Ms Powell, the former Commons leader who was ousted in Sir Keir Starmer’s reshuffle last week, is behind with 77 – just three shy of the 80 needed to make it to the next round.

Bell Ribeiro-Addy, Paula Barker and Dame Emily Thornberry all had support from 15 or fewer MPs as of Wednesday evening, fuelling speculation they could follow in the footsteps of housing minister Alison McGovern and pull out.

Ms Barker, the MP for Liverpool Wavetree, told Sky News she was “genuinely undecided” and had a lot to consider.

Ms Barker, a former trade union official, has challenged the government on Gaza and welfare cuts and is part of the newly formed soft-left “Mainstream group”.

Her allies are keen for her to stay in the race, with one telling Sky News she “outshone the others by miles” during an online hustings event for MPs, and would be a “real alternative for the membership”.

Her supporters are expected to throw their weight behind Ms Powell if she does drop out, with one saying of the Manchester Central MP: “She is closer to Andy Burnham, and she was just sacked, so those who dislike Morgan McSweeney [the prime minister’s chief of staff] I guess will get behind her.”

However, while describing her as “slightly more left” than Ms Phillipson, they said she is “hardly a socialist”.

Some MPs want to avoid a race between Ms Powell and Ms Phillipson, believing there is not much difference in what they offer, but others had more praise for the former, calling her performance at the hustings impressive.

One MP said: “Her pitch is that she’s been the shop steward of the parliamentary Labour Party (PLP) in government, but now she’s not in government she can dedicate herself to the role of deputy leader full time without a department to run. She wants to focus on defining our voter coalition and making sure we’re speaking to them.”

They added that Ms Phillipson might be too busy to fulfil the deputy leadership role, especially with SEND (special educational needs and disabilities) reform coming down the track “which could be a horror show”.

Ms Phillipson has been making the case to MPs about her experience fighting populism in her Houghton & Sunderland South seat in the North East, where Reform UK is on the rise.

Dr Jeevun Sandher said he was won over by the education secretary following her pitch at the hustings in which she also spoke about the cost of living crisis.

The MP for Loughborough told Sky News: “Bridget was strong, articulate, and very impressive. She was able to communicate the deep thought we need to govern well and win the next election.”

The deputy leadership race was triggered by the resignation of former deputy prime minister and housing secretary Angela Rayner after she admitted underpaying stamp duty on a flat.

The candidates need 80 backers by 5pm Thursday. As of Wednesday evening’s tally, 235 MPs had made their nominations out of Labour’s 398 MPs.

Ms McGovern pulled out on Wednesday afternoon, saying it was “clear that the momentum of this contest had shifted, and I am not going to progress to the next stage”.

The MP for Birkenhead was rumoured to be Number 10’s preference before it was clear Ms Phillipson – who she has since nominated – would enter the race.

Timeline for the race

Many Labour MPs are keen to see someone who would work constructively with the prime minister to avoid the party becoming more divided.

There are also calls for the deputy leader to be from the north to balance out the number of cabinet ministers who represent London seats – which both Dame Emily and Ms Riberio-Addy do.

If more than one candidate secures 80 nominations by Thursday evening, they will then need to gain backing from either three of Labour’s affiliate organisations, including two trade unions, or 5% of constituency parties.

That process will continue until 27 September, meaning a contested election threatens to overshadow the party’s annual conference that begins in Liverpool the next day.

The successful candidates will then appear on the ballot for a vote of all party members and affiliated party supporters, which will open on 8 October and close on 23 October at 12pm.

The winner will be announced on Saturday 25 October.