The United Kingdom's inflation rate increased 3% in January year over year but was down slightly from 3.4% growth in December.
The U.K. government and the Bank of England are confident inflation will soon be at 2%, which is the working level of inflation both prefer and have targeted. Officially.
On High Street, it certainly does not feel like this.
My wife and I used to joke that every time we left the house, we might as well throw £20 on the front lawn, for that is what we’d spend even if we were just going out for a walk. Now add a coffee and a pastry. Maybe we need some milk and bread, or our rail ticket needs topping up. Now, that £20 is more like £50, and how quickly that amount is increasing is noticeable.
I have read numerous articles as to how U.K. officials are trying to reduce inflation, but these attempts tend to be about how energy prices are to blame, or demand for travel services are to blame, or something along those lines.
The goods and services that go into the official bucket that is used to work out inflation always seems to me to be an exercise that suits whatever number is required at the end, not what the reality is.
According to the Office for National Statistics, in 2025, “23 items have been added to the basket for the Consumer Prices Index including owner occupiers’ housing costs, and 15 items have been removed, resulting in a total of 752 items in the 2025 basket.” Additions have included “virtual reality headsets, men’s sliders, exercise mats [and] pre-cooked pulled pork.”
I had to look up what a “slider” was, thinking it was a “mini burger,” but I learned it is a form of slipper. I am sure if one scours the details, of what is now in style and what is not, more questions and conundrums will come to mind.
For hotels, the cost of room nights might be inflation-proof for consumers to a certain extent, but the U.K. already is seeing evidence of guests and locals scaling back on eating out.
A BBC article on the increased cost of eating at restaurants stated that “hospitality bosses say their industry faces a significant double whammy — customers with less money to spend and rising business costs including taxes, food, wages and energy.”
British pubs recently got a tax break in that the sector’s business-rates calculation was modified, but restaurants and hotels did not. Hotels and restaurants are facing a bleak future, due in part or rates being calculated on square footage. Some say that action came after celebrity chef Gordon Ramsay bemoaned the situation.
UKHospitality is further worried that the government’s policy of allowing local mayors to impose tourism taxes/levies will further erode spending on the High Street.
In a news release, it said the hotel and hospitality sector “is already facing sharp increases in employment costs and business rates following the 2026 revaluation, with some accommodation businesses seeing rateable values nearly double, leaving little scope to absorb new charges without damaging growth and investment.”
It makes you wonder if politicians every walk along our High Streets.
Apologies if I have said this before, but I have a theory that politicians from their offices in Portcullis House on in the Palace of Westminster itself look down on Victoria Embankment and Westminster Bridge and see a London heaving with activity and jingling wallets.
They say, “Look at London, look at our success. Yes, the industry can afford another 2%.”
As inflation falls, usually so do interest rates, and lower interest rates do help in that they reduce the pressure from debt repayments — both on businesses and on consumers — and thus increase disposable income.
I would suggest it is human nature that when inflation does reach 2%, the politicians will crow about their achievements and not dare to make further tweaks that might make those accolades seem less robust.
Lower rates will increase confidence, but much pain already has been inflicted. Besides, operational costs are not going to fall by the same amounts, not to the level where that might mean breathing space for hoteliers and restauranteurs.
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