UK inflation slowed more than expected last month, providing a welcome lift for Chancellor Rachel Reeves as she prepares to deliver her spring statement today.
Official figures from the Office for National Statistics (ONS) showed that the Consumer Prices Index (CPI) rose by 2.8% in the 12 months to February, down from 3.0% in January. The reading came in below most analysts’ forecasts of 2.9%, signalling a slightly faster-than-anticipated easing in price pressures.
The slowdown was driven primarily by falling clothing prices, with additional downward pressure in the broader CPIH measure coming from lower housing and household service costs. On a monthly basis, CPI rose by 0.4% in February, compared to 0.6% a year earlier.
The timing of the data is significant for Reeves, who is expected to announce a series of spending cuts for some Government departments in her spring statement this afternoon. The easing inflation may bolster her position as she outlines plans to rein in public spending while aiming to maintain economic stability.
CPIH – a broader measure that includes owner occupiers’ housing costs – also dipped, rising 3.7% in the 12 months to February, down from 3.9% in January.
Despite the encouraging figures, economists have warned that the relief may be short-lived, with rising energy prices likely to drive inflation higher again in the coming months.
Neil Rudge, Chief Banking Officer Commercial at Shawbrook, commented: “Lower inflation may offer some relief for SMEs, but it doesn’t remove the bigger challenges they face.
“With today’s Spring Forecast, businesses will be looking to the Chancellor for tangible support to boost growth and confidence. Falling GDP, rising costs and trade uncertainty continue to make for a tough business climate. While lower inflation strengthens the case for rate cuts, it’s unclear how the Bank of England will respond.”
“Our research shows over a third of SMEs are calling for tax cuts to revive the economy—a clear sign they want stronger government support. The newly formed Board of Trade, which advises on trade policy and promotes UK exports, along with the government’s review of SME access to finance, could help unlock new opportunities. Making it easier for businesses to secure funding is vital for innovation, expansion and long-term resilience. In this environment, reliable funding remains essential, giving businesses the financial stability to plan ahead with confidence.”
