Andy Burnham has blamed Donald Trump’s war in Iran for higher inflation in Britain.
Inflation jumped to from 2.6pc in June to 2.9pc last month, according to figures from the Office for National Statistics, threatening to undermine the Prime Minister’s pledge to lower the cost of living.
Mr Burnham said: “We can’t control though what is going on in the Middle East and the effect of the conflict there is now being felt in inflation here, and in other countries around the world.
“I realise these times are really hard but already people can see a month into office I have done things that will make a difference”.
With inflation at 2.9pc, prices are now rising at their highest rate since March.
July’s inflation data is the first to capture a 13.5pc rise in the Ofgem price cap in response to soaring energy costs.
The latest figure shows the struggle that Mr Burnham faces to fulfil his promise to bring down living costs.
There are fears that inflation will climb higher in the coming months as the impact of the Iran war filters through to the economy.
Speaking at an event in the North East, Mr Burnham added: “I want to lead a cost-of-living Government, and I’ve already taken steps as Prime Minister to show I will help people wherever I can. I can’t do everything, I think people know that.
“We’re in tough times, but where I can do something to make life that little bit better, I will do it.”
Since arriving in No 10, Mr Burnham has made tackling the cost of living a key policy focus.
Last month, the Prime Minister announced he would remove VAT from electricity bills from October and reinstate the £2 cap on bus fares for 2027.
However, average energy bills are expected to jump around 4pc from October, according to energy analysts Cornwall Insight, wiping out any potential savings from Mr Burnham’s VAT cut.
The analysts said Ofgem’s price cap – which limits the average annual energy bill faced by a family home – would rise from £1,663 to £1,729.
Despite concerns about increasing gas and electricity bills, July’s rate of inflation was in line with economists’ expectations.
The lack of surprise means money markets now expect policymakers at the Bank of England to hold interest rates at 3.75pc at their next meeting in September.
03:48pm
Wrapping up
That concludes our coverage of today’s inflation figures – thanks for following.
You can follow along with our other coverage today here.
03:19pm
FTSE 100 reverses earlier declines
London’s FTSE 100 reversed earlier losses to rise 0.2pc by mid-afternoon.
Mining stocks helped to boost the blue chip index as gold and copper prices climbed higher. Fresnillo, the Mexican miner, led the way adding 6.6pc. Fellow mining company Anglo American gained 2.7pc.
They received a boost as gold prices climbed 1pc to $4,478.23
The more domestically-focused FTSE 250 rose 0.1pc.
02:45pm
Stocks in New York climb
Stocks on Wall Street opened higher on Wednesday as pressure from bond markets eased and investors digested fresh company earnings.
The S&P 500 rose 0.4pc, the Nasdaq climbed 0.1pc and the Dow Jones Industrial Average gained 0.3pc as trading began in New York.
It marks a turnaround from earlier in the week when a decline technology stocks weighed on Wall Street’s major indices.
02:25pm
Households brace for surging energy bills this winter
Household energy bills are on course to soar to their highest level in three years, wiping out any savings from Andy Burnham’s VAT cut on electricity.
Average energy bills are expected to jump around 4pc from October, according to energy research group Cornwall Insight, representing a £66 increase for a typical household.
The analysts said Ofgem’s price cap – which limits the average annual energy bill faced by a family home – would rise from £1,663 to £1,729.
02:06pm
Bonds yields fall following US intervention
Government borrowing costs across the United States, Japan and Europe have fallen after the American Treasury intervened announced it would increase buybacks of long-term debt.
On Tuesday government borrowing costs across major western economies rose sharply to levels seen in the run up to the financial crisis over investors fears of ballooning debt.
However, in an attempt to calm bond markets the US Treasury announced it would double the size of its buyback of long-term US government debt.
The announcement caused 10 year US Treasury yields to fall 6 basis points to 4.65pc, down from the multi-decade high it reached on Tuesday.
01:42pm
Bank of England likely to hold interest rates
Policymakers at the Bank of England are likely to hold interest rates at 3.75pc at their next meeting in September, economists have said.
Despite concerns about increasing gas and electricity bills in the coming months July’s rate of inflation was largely as expected.
Cathal Kennedy, senior UK economist at RBC Capital Markets, said: “There may be inflationary pressures rising below the surface, in particular in respect to food and energy prices, but in the here and now, the lack of any great surprise in the inflation data …. continues to afford the MPC (Monetary Policy Committee) time as it tries to assess the second round impacts of energy price rises.”
Markets are now pricing in just a 12.5pc chance that the Bank of England will increase interest rates in September.
James Smith, developed markets economist at ING, said: “We currently expect headline inflation to peak around 3.2pc into next winter, on the assumption that food inflation does start to pick up a bit.
“We continue to see the Bank of England keeping rates on hold this year, before resuming rate cuts next spring.”
01:10pm
The ‘tax on the City’ fuelling the stock market’s collapse
When US hedge fund Elliott Management moved to buy a stake in BP last year, there was more to the purchase than met the eye.
On the face of it, the fund had acquired about 800,000 of BP’s publicly traded shares for £3.8bn. But on closer look, it emerged that Elliott had in fact bought only about 100 BP shares, worth a measly £360.
How had Elliott managed to acquire £3.8bn of BP and spend just £360? The answer was that most of the shares had been bought by an investment bank on Elliott’s behalf using complex derivatives.
12:51pm
Defence spending pushes borrowing costs higher, says Germany
The recent rise in government borrowing costs is because of an increase in defence spending, Germany’s finance ministry has claimed.
A spokesman for Germany’s finance ministry told Reuters: “In light of Russia’s aggression… the security situation in Germany has changed profoundly. Massive investment in security and defence is therefore required.”
He added: “In the long term, it would be far more expensive not to invest today.”
German 10 year and 30 year borrowing costs climbed to a fresh 15 year high on Wednesday as investors grow wary of soaring government debt and geopolitical tensions.
The yield on 10-year German bonds rose by 0.01 percentage points to 3.27pc on Wednesday, the highest level since 2011.
It comes as government borrowing costs climbed to multi-decade highs in a raft of other major Western economists, including the US, France and Japan.
12:17pm
Oil climbs to three week high
Oil prices rose to a three week high on Wednesday as tensions in the Middle East continue.
Brent crude, the international benchmark, climbed to $91.80 a barrel at lunchtime.
The rising price of oil comes as investors weighed up a report that Iran is considering targeting US military sites in Europe.
Tehran is said to be assessing the possibility of strikes if Donald Trump escalates the conflict in the Middle East, according to the Financial Times.
Trump said on Tuesday there were no talks with Iran and that the Strait of Hormuz was open.
However, Tehran contradicted the US President’s claim and said the crucial waterway remained shut to shipping.
11:38am
Inflation on a ‘bumpy path’
The rise in inflation to 2.9pc comes as the job market is weakening, meaning households will notice prices increasing but their salaries are unlikely to follow.
“The inflation outlook will involve some pain for households, particularly as private-sector pay growth slows,” warns Martin Beck, chief economist at WPI Strategy.
He adds: “Even a temporary period of higher inflation leaves a permanent mark on the price level. Families will therefore face a lasting increase in the cost of living, squeezing real incomes and spending and adding to the risks of weaker growth and higher unemployment.”
Meanwhile, prices could well go higher still if the war stays at an impasse.
“External pressures may be building again. The conflict in the Middle East remains unresolved, while extreme weather – from the UK’s recent heatwaves to the risk of a strong El Niño – could add pressure on food prices down the line,” says Adam Deasy, economist at PwC UK.
“Inflation is still on a bumpy path back to target. Further shocks may yet knock the journey off course,” he warns.
None of this is good news for Burnham. More worryingly still, the UK’s borrowing costs are under pressure, as investors demand a bigger premium to hold gilts.
The government this week had to accept paying interest of 5.155pc to investors to flog a 10-year bond – the highest since August 2007.
Higher borrowing costs will chip away at Chancellor John Healey’s spending power at the Budget, potentially even forcing him to raise taxes.
11:19am
Markets in London slide
Shares in London have edged lower as investors reacted nervously to the latest inflation figures.
The FTSE 100 fell by 0.2pc to 10,710.14. While the more domestically-focused FTSE 250 shed 0.3pc to 24,479.34.
Smith and Nephew, the blue-chip medical products company, lost 4.6pc after it announced that its finance chief John Rogers would step down at the end of September to take up an external position in the US.
11:04am
Rebound in inflation is a ‘warning shot’
Andy Burnham has made easing cost of living pressures and bringing back hope key to his pledge to voters.
In his first big speech in Manchester in late June, he said: “I heard on doorsteps in Makerfield how people need a bit extra now to help with rising costs.
“I will do my very best to deliver it and, whilst not taking risks with the public finances, will seek to give Britain some breathing space as soon as I can.”
As Donald Trump’s unsuccessful war in Iran rages on and the cracks in the job market are growing, he may soon find it is harder said than done.
Figures from the Office for National Statistics show that inflation rose to 2.9pc in the year to July, rising from 2.6pc the previous month.
Experts warn the rise in the cost of living is a sign of what’s to come – and it is not good.
“This rebound in UK inflation is a warning shot for what could come next,” says Scott Gardner, investment strategist at J.P. Morgan Personal Investing.
09:27am
Analyst: Burnham faces challenge to ease financial pressure
Lucy Smith, senior investment manager at Killik & Co, says the latest inflation figures highlight the challenge facing Andy Burnham.
Rising inflation is a setback for households already feeling the strain of higher living costs. While summer can often bring some relief through seasonal discounting and lower energy demand, recent volatility in global energy markets and the increase in the energy price cap have continued to put upward pressure on prices.
This, paired with the recent ONS figures showing earnings growth slowed in June, highlights the challenges Burnham’s government will be facing to ease financial pressures ahead of his first Autumn Budget.
Even if energy markets stabilise in the coming months, the approach of winter is likely to keep inflationary pressures elevated, making it difficult for the Bank of England to keep inflation around their 2pc target.
For households, the picture remains challenging. Mortgage rates are likely to stay elevated for some time, while food and everyday costs continue to weigh on budgets. As always, maintaining a long-term approach, saving where possible and investing regularly can help people stay focused on their financial goals despite short-term economic uncertainty.
08:31am
Your views
08:10am
JP Morgan: Inflation rebound is a ‘warning shot’
Scott Gardner at JP Morgan Personal Investing describes this morning’s numbers as a “warning shot for what could come next”.
Until now, the spike in global energy prices had been felt the most among motorists when filling up their vehicles at the petrol pump. July data shows that the inflationary impact of the US-Iran war is spreading as rising energy costs feed through into higher household bills.
As the situation in the Middle East remains uncertain, the continuation of elevated energy costs remains the largest challenge for consumers and businesses. Petrol prices have already risen 6.3pc in August compared to the previous month and will show up in next month’s reading.
Businesses are also facing higher input prices which are being passed on to buyers and could rise heading into the colder months later this year. Falls in services inflation and shop prices are helping to offset some of these pressures for now but the jury is out on whether this will last.
While one data reading doesn’t always tell the whole story, this rebound in UK inflation is a warning shot for what could come next.
07:58am
FDF: Extreme weather poses next threat
Dr Liliana Danila, chief economist at the Food and Drink Federation (FDF), welcomed the fall in prices but warned the industry was not out of the woods.
She said: “Supply chain disruption isn’t going away. Alongside geopolitical volatility, extreme weather will continue to put pressure on the price of key ingredients.
“This makes it increasingly difficult for food manufacturers to shield consumers from price rises and protect their own resilience.
“It will be very challenging for manufacturers to swallow any higher costs that come as a result of the extremely hot and dry weather we’ve had across Europe this summer.”
07:56am
Food inflation eases
There is some good news in this morning’s data – food and drink inflation has slowed.
The price of food and non-alcoholic drink rose by 1.3pc in the 12 months to July, down from 1.7pc the previous month. On a monthly basis, prices were unchanged from June 2026.
Prices rose the fastest for fish, water, preserved fruit and frozen seafood. But there were price drops across a number of categories, with the largest declines for pizza, butter and jams & marmalades.
07:51am
Free up markets to ease price pressures, urges economist
Economist Julian Jessop offers his suggestions to Andy Burnham for keeping a lid on inflation…
07:48am
Labour’s summer VAT savings fail to move the dial
The Government’s Great British Summer Savings Scheme, which slashed VAT on family attractions such as theme parks, theatres and cinemas, was presented as a major boost for Britons struggling with the cost of living.
The ONS said the scheme, which began on June 25 and runs until the end of August, likely resulted in some price reductions, but that it “doesn’t appear that it has had a substantial overall impact on headline consumer inflation”.
Charlotte O’Leary, NIESR associate economist, added: “We expect this has minimal impact on dampening inflation.”
07:41am
Surging inflation poses dilemma for BoE
With prices expected to keep pushing higher, policymakers at the Bank of England may be forced to raise interest rates despite wider concerns about the health of the economy.
Suren Thiru at the ICAEW said: “While July’s hotter inflation reading is unlikely to trigger a September rate rise, given the dampening effect of a softer labour market on underlying price pressures, it does reignite the prospect of further policy tightening before the end of the year.”
07:37am
BCC: Inflation is number one concern
The British Chambers of Commerce says inflation is the “number one concern” among companies, with two-thirds citing it as a worry in the second quarter.
Caterina Batog at the BCC said: “Margins are being squeezed hitting investment and recruitment.
“The Government must use the Budget as an opportunity to back business, cut costs and deliver growth.
“The Chancellor needs to give firms the breathing space they desperately need by outlining ambitious measures to drive forward trade, investment and productivity.”
07:34am
Tories: Everyone paying the price for Labour’s bad choices
Andrew Griffith, shadow business secretary, has delivered a damning review of Labour’s handling of the economy.
07:31am
More pain to come, economists warn
July’s inflation print doesn’t make for pretty reading, but economists are warning that the pain could only just be getting started.
Yael Selfin at KPMG said the figure “marks the beginning of a gradual upward trend in inflation, with further increases in energy-related costs expected to push inflation higher over the coming months”.
Suren Thiru, ICAEW chief economist added: “July’s uptick is unlikely to be a one-off, with drought-related increases in food prices and surging energy costs raising the prospect of inflation topping 3.5pc later this year, especially if disruption in the Strait of Hormuz persists.
“Rising inflation is likely to become the biggest threat to UK growth in the coming months as it eats into household budgets by increasing the cost of essentials, while also raising government borrowing costs and eroding the Chancellor’s fiscal headroom ahead of October’s Budget.”
07:26am
Healey: Britain’s economy is resilient
Chancellor John Healey has attempted to play down concerns about the UK economy and soaring cost of living.
He said:
“Iran war inflation continues to impact prices here at home, but Britain’s economy is resilient.
“We have cut VAT on electricity bills and capped bus fares at £2 – to give breathing space to those feeling the strain.
“There is more to do to restore hope and build a stronger economy where prosperity is shared more fairly across Britain.”
07:25am
Heatwave drives up demand for clothes
Searing temperatures during July’s heatwaves is thought to have driven up demand for clothing.
The ONS said unusually strong sales for this time of year could be attributed to consumers filling their wardrobes with cooler clothes.
07:17am
Largest rise in gas prices since Ukraine crisis
Last month marked was the largest rise in gas prices since October 2022, when UK consumers were initially exposed to the higher prices from the energy crisis triggered by the war in Ukraine.
The price rise this month means that gas prices are at their highest level since March 2024.
07:12am
Gas prices drive up inflation
July’s jump in inflation has been primarily driven by higher gas prices, which recorded their biggest rise in almost four years as Ofgem lifted the energy price cap.
Mike Hardie at the ONS said:
Inflation rose in July, driven by a sharp increase in gas prices following this month’s change to the energy price cap. This was the largest rise in gas prices for almost four years.
Other upward pressures included furniture prices falling by less than usual for this time of year and also a smaller fall for clothing prices due to reduced discounting.
The prices of raw materials and goods leaving factories slowed again, driven by a drop in the prices of crude oil and refined petroleum respectively.
07:01am
Good morning
5 things to start your day
1) Record number of foreigners claiming benefits | EU citizens account for the biggest proportion of total migrants receiving Universal Credit
2) Burnham faces two big tests on the economy | The PM needs to realise how close businesses are to their tipping point before it’s too late
3) The ‘tax on the City’ fuelling the stock market’s collapse | Stamp duty on shares is costing pensioners billions and hedge funds almost nothing
4) Guinness owner cuts 2,000 jobs as ‘Drastic Dave’ drives turnaround | Diageo’s staff numbers fall by 6.4pc as new chief executive reins in spending following profit slump
5) Burnham’s bus plan leaves West Midlands with £30m bill | Prime Minister hails move to transfer ownership of hundreds of routes and fleet of depots
What happened overnight
The Dow Jones Industrial Average fell 0.2pc, the S&P 500 dropped 0.6pc and the Nasdaq Composite slumped 1.3pc.
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