UK Inflation Falls To 1.9%

The UK's Rate Of Inflation Has Fallen Below 2% For The First Time In Four Years


Steven Beahan, Partner | +44 (0)114 294 7868

The UK's rate of inflation, as measured by the consumer price index, has fallen to 1.9 per cent - down 0.1 per cent on December's figure.

A statement released by the Office for National Statistics (ONS) has shown that the price both businesses and consumers pay for their products has fallen substantially from its peak during the recession.

The rate is now below the Bank of England Monetary Policy Committee's target of two per cent - a number that has not been reached since 2009.

Lowered inflation was mostly put down to drops in the cost of recreational and cultural activities, with statisticians at the ONS finding that entrance fees to attractions like theme parks and gigs, as well as lowered DVD and Blu-ray prices, had a large impact on the figures.

Reductions in tobacco prices, alcohol costs and furniture were also cited as contributing factors to the drop.

Prime minister David Cameron welcomed the fall in inflation and said it was proof his government's plan "is working", before adding that the coalition is helping to "secure the future for hard-working people".

Labour, however, said that the drop in inflation - down just 0.1 per cent - would not affect working families.

Cathy Jamieson, Labour's shadow treasury minister, said: "This small fall in the inflation rate is welcome, but with prices still rising much faster than wages the cost-of-living crisis continues. Under David Cameron, working people are now on average £1,600 a year worse off."

"Labour's plan will tackle the cost-of-living crisis and earn our way to higher living standards for the many and not just a few."

The government denies these claims and believes its reforms are improving the labour market and helping working families.

Unemployment figures released today (February 19th) show the number of jobless people in the UK's working population dropped to 7.2 per cent.

The coalition believes great business investment is the main reason the improvement occurred.

Expert Opinion
The majority of businesses will welcome this latest fall in inflation and will be pleased that it is showing signs of levelling out.

“Not only does it increase spending power, It will also relieve pressure on the need to raise interest rates in the short to medium term - something which affects future borrowing and the likelihood of future investment in things such as plant and machinery.

“It will be interesting to see which direction the rate will move in the future, particularly as the economy improves and wage demands start to increase.”
Steven Beahan, Partner