London Daily

Focus on the big picture.
Friday, Oct 09, 2026

Why is UK inflation higher than other countries?

Why is UK inflation higher than other countries?

The UK's inflation rate jumped unexpectedly last month with the cost of living rising faster here than in most of the world's advanced economies.

Price rises rose by 10.4% in the year to February, in contrast to the US and the Eurozone where inflation has eased to 6% and 8.5% respectively.

Inflation is volatile and reading too much into one month's figures would be a mistake, however, the UK's inflation rate has been persistently higher on average compared to the US and other large economies in Europe over the past year.

With the cost of living continuing to eat away at household budgets - many are starting to ask: Does the UK have its own inflation problem?

We look at three factors driving up prices:


1. Food price rises


One of the main drivers of February's inflation rise was the price of food in the UK continuing to surge.

Food inflation was up 18.2% last month compared to the same time a year earlier, with salad and vegetable shortages driving the latest rises in costs for customers.

Tomatoes, peppers and cucumbers have been some of the goods in short supply largely due to extreme weather in Spain and North Africa hitting harvests. In the winter, the UK imports a lot of such produce from abroad.


The shortages have also been compounded by high energy prices in the UK leading to vegetable growers and farmers cutting down on crop yields or avoiding producing certain foods at all due to rising running costs, according to Minette Batters, president of the National Farmers Union (NFU).

She says its a "it's a very complex picture" but all of the union's surveys of growers show that businesses are contracting and the more the sector shrinks "the less there is, the rationing comes in and that just drives further food inflation".

Farmers have also argued that retailers and supermarkets are not paying a fair price for them for their produce, and the government's food tsar has said supermarkets having "fixed-price contracts" with suppliers means when food is scarce, some producers opt to sell less to the UK and more elsewhere in Europe.


2. Wholesale gas prices


Energy bills have risen globally since Russia invaded Ukraine. However, the impact felt in the UK by higher gas prices has been harder for households and businesses than their counterparts in other advanced economies.

Analysts say the UK is more exposed to rises in the prices of wholesale gas.

Jonathan Haskel, a member of the Bank of England's Monetary Policy Committee which decides on interest rates, has said previously the UK appeared to be one of the "most susceptible" countries to energy price shocks.

He cited the UK being a bigger user of gas to heat homes and keep lights on than other European countries. He also added that gas was transferred mostly via pipelines from a handful of suppliers, whereas the US produced most of its own gas and relied more on Liquefied Natural Gas (LNG).

Taxes being lower on electricity and gas paid by UK consumers compared to their European neighbours meant when wholesale gas prices rise, UK energy bills "would be expected" to go up more than others, he said.

On the upside, this means bills should fall more quickly when the wholesale prices come down, as they are expected to in the coming months.

Martin Beck, chief economic adviser to consultancy the EY Item Club, says February's rise is a "flash in the pan".

"Things will improve quickly - it's bad news today," he adds.


3. Worker shortages and wage rises


The energy price shock is a major driver of the prolonged high inflation in the UK, but it's not the only cause with the UK also having a major worker shortage.

During the pandemic, all major countries saw their workforce shrink.

But while most leading economies have since recovered, the UK still has about 400,000 more people not working than in December 2019.

A study by the think tanks Centre for European Reform and UK in a Changing Europe suggests there are 330,000 fewer workers in the UK as a result of Brexit, with sectors such as transport, hospitality and retail have been particularly hard hit.


Other reasons include young people opting to study rather than work, older people retiring early, and more people being off work due to long-term sickness.

The shortage of workers has helped drive up pay packets with employers shelling out more to attract and retain staff.

Many supermarkets have given staff several pay rises as they battle to find workers.

Bank of England governor Andrew Baily warned workers asking for pay rises last year, saying it could push inflation out of control, though unions argue they are required to cope with the rising cost of living.

Experts are still predicting price rises to slow in the coming months, but if the UK gets more surprises like February's and high inflation persists, more questions will emerge of why the UK is an outlier.

Newsletter

Related Articles

0:00
0:00
Close
UK and Germany Finalize Kensington Treaty to Strengthen Defense and Technology Cooperation
Britain Maintains Diplomatic Mission in East Jerusalem Despite Israeli Closure Deadline
English Councils Push Government to Rethink Proposed Funding Cuts
Scottish Homebuilding Falls to Lowest Level in 11 Years
BBC Chief Matt Brittin Defends Restructuring as Staff Challenge Job Cuts
UK Finance Warns High Energy Costs and Bond Yields Are Complicating Fiscal Outlook
UK Adopts All 44 Recommendations on Regulating AI in Healthcare
Chancellor John Healey Prepares Autumn Budget as Borrowing Costs Strain Public Finances
UK Investigators See Strong Indications of Iranian Link After RAF Fairford Security Operation
Laura Trott Pledges Tighter Controls on Political Activism in UK Classrooms
Welsh Ministers Launch Long-Term Review of North Wales and Anglesey Crossings
Welsh Government Orders 18-Month Study of Road Solutions Around Newport
Reform UK MP Sarah Pochin Faces Scrutiny Over £800,000 Second Home Purchase
British Households Grow More Concerned About Fuel and Energy Prices
NHS Leaders Warn of Rising Winter Pressure on Emergency Departments
Kemi Badenoch Proposes £2.3 Billion Employer National Insurance Cut for Young Workers
Middle East Conflict Could Erase UK Fiscal Headroom, Economists Warn
Manchester City Found Guilty of Multiple Premier League Financial Rule Breaches
UK Security Services Find Strong Indications of Iranian Role in RAF Fairford Incident
Costa Coffee Returns to Operating Profit on Iced Drinks and Menu Changes
Asos Warns Customers After Unauthorized Access to Retail App and Data
Kemi Badenoch Puts Growth and Deregulation at Center of Conservative Conference
Campaigners Warn of Deepening Social Care Crisis for Disabled Adults
Study Finds Rising Early-Onset Cancer Rates Among Adults Under 50 in Britain
UK Coach Operators Warn High Diesel Prices Could Force Route Cuts
FCA Opens Independent Review Into Handling of Epstein-Linked Whistleblower Case
Argentina Vows to Block Falkland Islands Offshore Oil Development
UK Chancellor Prepares Fiscal Measures and Welfare Reforms Ahead of Autumn Budget
Sainsbury’s and Morrisons Explore Potential Multi-Billion-Pound Merger
UK Weighs Tariffs on Chinese Electric Vehicles to Align With European Union
UK Threatens Diplomatic Expulsions Over Planned Closure of East Jerusalem Consulate
UK Energy Price Cap Hits Three-Year High as Middle East Conflict Raises Costs
Seventh Arrest Made in Suspected Terror Plot at RAF Fairford
Systemic Education Collapse Sparks Mass Student Uprisings in France
Green Party Faces Backlash Over Resolution Equating Zionism With Racism
Conservatives Debate Scrapping Environmental Rules for New Homes
Cornwall Insight Warns UK Energy Bills Could Approach £2,000 This Winter
UK Coach Operators Warn of Service Cuts as Diesel Prices Exceed £2
Scottish Parliament Approves £68 Billion Budget With New Tax and Property Measures
FCA Opens Independent Review Into Handling of Epstein Whistleblower
UK Government Drops Plan to Suspend Jury Trials in England and Wales
Bank of England Holds Interest Rate at 3.75% as Markets Watch November
Two Iranian Nationals Charged Over Alleged Plot Targeting Manchester Jewish Community
UK Fiscal Headroom Halves to £11 Billion Ahead of Budget, EY Warns
US Bomber Withdrawal From RAF Fairford Prompts UK Security Review
Sarah Wakfer Appointed Chair of Northern Ireland’s Health and Care Regulator
Scotland Housing Completions Fall to 11-Year Low Amid National Shortage
UK Water Companies Face Tougher Oversight and Unannounced Regulatory Inspections
Middle East Conflict Pushes UK Fuel and Wholesale Energy Prices Higher
Andy Burnham Raises Prospect of Second Brexit Referendum in Review of UK-EU Relations
×