Inflation falls to 0.2% due to Eat Out To Help Out

UK inflation hits highest level since 2013, bad news for savers

The UK inflation rate fell to 0.2% in August thanks to the Eat Out To Help Out.

Falling sharply from the 1% rate in July, the scheme cut VAT from 20% to 5% in the hospitality sector and offered 50% off food up to the value of £10 in cafes and restaurants between Monday and Wednesday.

A decline in airfares and clothing also contributed to the fall in UK inflation throughout August.

ONS deputy national statistician Jonathan Athow said: “The cost of dining out fell significantly in August thanks to the Eat Out to Help Out scheme and VAT cut, leading to one of the largest falls in the annual inflation rate in recent years.”

“For the first time since records began, airfares fell in August as fewer people travelled abroad on holiday. Meanwhile. the usual clothing price rises seen at this time of year, as autumn ranges hit the shops, also failed to materialise.”

The ONS was unable to find the prices for eight items during August, including live music, swimming pools, and cruises.

During the Eat Out To Help Out scheme in August, Britons spent £155m less in supermarkets than in the previous month. However, the grocery sector is still expected to grow by 6% this year, according to analysts at Neilson.

Mike Watkins, head of retailer and business insight, said: “Food retail sales are still being boosted by households working from home, and such disruptions are expected to continue for the foreseeable future. However, with more Covid-19 headwinds set to come and a fragile economy, a weakened shopper sentiment will likely start to impact consumer spend overall.”