𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

The UK economy was branded “weak and vulnerable to external shocks” as inflation remained steady at 3% and a global energy crisis threatened to push up prices for months to come. Building societies warned mortgage payments are set to rise, and households face higher council tax bills as local authorities imposed inflation-busting increases.

Chancellor Rachel Reeves insisted she was taking “a responsive and responsible approach” to help people with the cost of living “in an uncertain world”, despite being hit by a series of disappointing figures. She will on Thursday meet representatives from the banking industry to discuss further ways of supporting families.

Progress meeting the Government’s inflation target of 2% appeared to have stalled, with the latest data showing no change. However, the British Chambers of Commerce (BCC) said that the economic impact of the war in the Gulf has yet to be felt.

The inflation data “represents the calm before the storm” according to BCC’ research manager Stuart Morrison. He said: “UK firms are particularly exposed to the economic impact of the crisis in the Middle East as our electricity prices are tightly tethered to global gas prices.

“This will feed directly into higher costs and renewed inflationary pressure in the months to come.”

Conservatives pointed out that the UK has the highest inflation rate of the G7 club of the world’s wealthiest countries at 3%, compared to a rate of 2.4% in the US and 1.9% in the Euro-zone.

Shadow Chancellor Sir Mel Stride said: “Thanks to Labour’s mismanagement, we are entering this latest energy crisis with the highest inflation in the G7. Under Rachel Reeves our economy is weaker and more vulnerable to external shocks.

“The cost of living was already rising too fast for families, who will now be bracing for the impact of events in the Middle East on their bills.”

Finance experts issued a dire warning that inflation could soar in the months to come. Charlotte Kennedy, Chartered Financial Planner at wealth management company Rathbones, said: “The conflict in Iran, and the resulting surge in energy prices, means the latest inflation figures are already out of date when it comes to where prices are heading next.”

It means the Bank of England may be forced to increase interest rates, leading to higher mortgage payments for some homeowners.

Harriet Guevara, Chief Savings Officer at Nottingham Building Society, said: “Markets are increasingly expecting that rates could rise, potentially multiple times over the course of the year, reflecting a growing recognition that rates may need to stay higher for longer if inflation continues.”

Council tax bills are also rising, adding to pressure on struggling households. Official figures last night showed the average Band D council tax set by local authorities in England for 2026-27 will be £2,392, which is an increase of £111 or 4.9% on the 2025-26 figure. This includes all precepts, such as adult social care and parish precepts.

Motorists are facing higher bills at service stations, with average petrol prices up 13% since the US and Israeli war against Iran began. A litre of petrol now costs 149.4p on average, up from 132.8p, data from the RAC showed.

Diesel prices have risen by nearly a quarter since the start of the conflict, up from 142.4p on February 28 to 175.7p now.

The rise comes after oil prices soared to as much as 120 dollars a barrel in response to Iran’s stranglehold on tankers passing through the Strait of Hormuz.

Chancellor Rachel Reeves said: “In an uncertain world we have the right economic plan, taking a responsive and responsible approach to supporting working people in the national interest.

“We’re taking £150 off energy bills and providing targeted support for those facing higher heating oil costs. We’re also acting to protect people from unfair price rises if they occur, bring down food prices at the till, and cut red tape to boost long-term energy security — building a stronger, more secure economy.”

The Treasury highlighted new measures to help watchdog the Competition and Markets Authority crack down on price gouging, and plans to speed up the creation of new nuclear power stations to provide energy.

Ministers are also considering targeted reductions in import tariffs that could bring down checkout food prices.