UK inflation falls to 2.6% in March

UK inflation slowed more than anticipated in March, offering a glimmer of relief for households and businesses grappling with cost pressures, according to official figures released today.

The Consumer Prices Index (CPI) rose by 2.6% in the 12 months to March 2025, down from 2.8% in February, the Office for National Statistics (ONS) reported. This marks the second consecutive monthly fall and the lowest annual inflation rate since December 2024.

The decline was sharper than economists had forecast, with consensus expectations pointing to a more modest drop to 2.7%.

The fall was largely driven by a decrease in petrol prices and softer costs in recreation and culture sectors, the ONS said. On a monthly basis, CPI rose by 0.3% in March, compared with a 0.6% rise during the same month last year.

CPIH, which includes housing costs, also saw a slowdown, with significant downward pressure from housing and household services alongside motor fuels and cultural goods.

“Lower inflation could ease pressure on supply chains and operating costs, but for many small business owners, the reality remains challenging,” he said. “Rising employer National Insurance contributions and the recently increased minimum wage continue to squeeze cash flow at a time when growth is already hard-won.”

He also warned of continued global volatility: “With trade tensions threatening to escalate, exporting SMEs face ongoing uncertainty, complicating strategic planning for businesses that rely on overseas markets.”

Still, Rudge noted that the drop in inflation could strengthen expectations of interest rate cuts later this year, potentially boosting business confidence. “Many [SMEs] are cautiously optimistic and beginning to revisit postponed growth plans,” he added, though he stressed the importance of flexible lending and greater access to finance to support recovery.