UK inflation unexpectedly rose to 4% in December

UK inflation unexpectedly rose to 4.0% in December 2023 from 3.9% in November.

The Consumer Prices Index (CPI) marginal rise was attributed to rising alcohol and tobacco prices as a result of recently introduced increases in tobacco duty.

The Office for National Statistics figures for December mean inflation has risen for the first time since February 2023, surprising economists who believed that inflation would continue to fall to 3.8%.

The surprise growth to 4% has dampened expectations that the Bank of England will cut interest rates early this year.

Neil Rudge, Head of Enterprise at Shawbrook, said, “Frustratingly, the latest ONS figures demonstrate an increase in inflation similar to that seen in other developed economies like the US and France.

“Whilst today’s news will not be met with joy in the business community, the longer-term trend of falling food inflation, reductions in wage growth, and a solid set of GDP figures earlier this month, supports the general feeling that the macroeconomic environment is brightening and business confidence is holding.

“Business leaders will be hoping these figures do not prompt the central bank to stall on cutting rates or worse, into forcing their hand with a rate hike in subsequent months. Importers will also be keeping a close eye on shipping price increases resulting from the disruption in the Red Sea.

“Whilst it can be easy to perceive the current situation as somewhat of an economic ‘no man’s land’, it remains vital that SMEs do not sit on their hands but continue to plan and execute as best they can. Whether your business is looking for support during a tough period or gearing up for expansion, consider talking to a specialist lender who can offer unique funding options not typically supplied by traditional high-street lenders.”