UK inflation holds at 3% in February; figures predate US-Israel war with Iran
UK inflation remained at 3% in the year to February, unchanged from January and in line with expectations, according to the Office for National Statistics. The rate is still above the Bank of England’s 2% target. The data were collected before the start of the US-Israel war with Iran, which has already pushed up energy and fuel prices.
Dharshini David said the conflict is expected to derail a hoped-for drop in inflation in the coming months. A steady inflation rate does not mean prices are flat; it means they are rising at the same annual pace as the previous month. The ONS said lower petrol and diesel prices exerted the biggest downward pressure on inflation in the year to February.
Food price inflation eased slightly but remained higher than the headline rate. By contrast, clothing was the largest driver of inflation, and prices for clothing, footwear, furniture and household goods rose more quickly than other categories, pushing up the overall rate.
Chancellor Rachel Reeves said she has the "right economic plan" and is taking a "responsive and responsible approach to supporting working people in the national interest", pointing to a £150 reduction in energy bills and other support measures. Her Conservative counterpart Mel Stride said that "thanks to Labour’s mismanagement" the UK is "entering this latest energy crisis with the highest inflation in the G7".
Businesses already feeling the strain warned of mounting pressures. Daniel Pilley, who runs the Gainsborough Health Club and Spa in the Suffolk countryside, said his business relies on oil to heat its pool and facilities. "We buy 500 litres of oil every single week.
The price has gone from 59p per litre to £1.50 per litre in the space of two weeks," he said, calling for government action and describing the rises as profiteering by large oil companies. He said he is absorbing much of the cost rather than passing it on, but that it is forcing tough decisions on hiring.
"A few years ago, we had seven apprentices in our business. We’re now just down to one." Food manufacturers also warned of further price pressures. The Food and Drink Federation said the slight fall in overall food inflation in February was likely the "calm before the storm" as higher energy costs make it more expensive to grow, process and transport food and raise the cost of fossil-fuel derived fertiliser.
"The cost of the Iran conflict will be felt by shoppers this year," predicted FDF chief executive Karen Betts. Figures in the next few months will begin to show whether the conflict-linked energy shock feeds through to broader prices, with economists expecting near-term readings to be higher than previously hoped, according to Dharshini David.