Author: Martin Wheatcroft

ICAEW chart of the week: Student loans

My chart for ICAEW this week looks at how the Department for Education has impaired 40% of the value of its student loans outstanding as at 31 March 2025.

This is before taking account of the government’s decision to freeze repayment thresholds over the next three years, which should reduce the impairment to 38%.

According to the Department for Education’s consolidated annual report and accounts 2024/25, the face value of student loans in England increased from £234bn to £265bn during the year ended 31 March 2025. The movements comprised £21bn in new loans advanced to students during the year and £15bn of added interest less £5bn in repayments.

As our chart also illustrates, the carrying value in the department’s balance sheet increased from £151bn to £158bn, once an impairment of £24bn during the year is taken into account – increasing the cumulative impairment from £83bn to £107bn.

This is an increase in the impairment percentage from approximately 35% on 31 March 2024 to 40% on 31 March 2025 based on the fair value of the student loan portfolio calculated by the department.

The £21bn impairment can be analysed between an immediate £6bn impairment on the inception of new loans issued during the year (approximately 30% of their face value) and £15bn from the recalculation of the fair value of loans at the end of the financial year, co-incidentally pretty much offsetting the interest added to the loans. 

The loan portfolio can be broken down between Plan 1 loans for undergraduate courses that started before 1 September 2012 (face value £28bn less £14bn cumulative impairment = fair value £12bn on 31 March 2025), Plan 2 loans for undergraduate courses between 2012 and 31 August 2023 (£216bn – £87bn = £129bn), Plan 3 loans for postgraduates (£7bn – £1bn = £6bn) and Plan 5 loans for undergraduate courses starting from 1 September 2023 onwards (£14bn – £3bn = £11bn).

The recent controversy around student loans has been around the interest rates charged on student loans, and in particular those of Plan 2 loans owed by the majority of former students, which are based on RPI + 3%. In the year from 1 September 2025 the interest rate is 6.2% for those earning £51,245 (£4,270 a month) or more reducing to 3.2% for those earning £28,470 (£2,372 a month) or less. 

This often means that the balance outstanding grows by more than the amount repaid. For example, someone earning £42,000 (£3,500 a month) with Plan 2 student loans totalling £50,000 on 1 September 2025 would see £2,490 (at an interest rate fractionally under 5%) added to their loan over the year to 31 August 2026. As their repayments would be equal to approximately £1,220 (being 9% on their earnings above the Plan 2 threshold of £28,470) their debt would rise to £51,270.

Most current undergraduates are under Plan 5, which has a flat interest rate of RPI irrespective on income but a lower £25,000 repayment threshold which could see them pay a lot more over their 40-year terms than those on the 30-year Plan 2 loans. In our example, a graduate on £42,000 a year with £50,000 in Plan 5 loans brought forward would see £1,600 added in interest and repay £1,530 to result in a much smaller increase in their outstanding loan balance.

With the government suggesting that they are going to have another look at the way student loans are designed, many graduates will be hoping that reform is the air.

ICAEW chart of the week: Real average pay in the UK

Our chart this week illustrates how UK average total pay fell by 0.2% in real terms over the 12 months to December 2025, following much stronger growth in the previous two years.

According to an Office for National Statistics (ONS) release on 17 February 2026, real average weekly earnings adjusted for consumer price inflation fell by 0.2% in the 12 months to December 2025, following increases of 1.9% and 3.6% over the course of 2023 and 2024 respectively.

After converting the ONS data from weekly to monthly and scaling up to December 2025 pound values, our chart this week illustrates these changes, showing how average weekly total pay (including overtime and bonuses) in real terms increased from £3,029 in December 2022 (in December 2025 values) to £3,086 and £3,198 in December 2023 and 2024 respectively, before falling to and £3,192 in 2025.

Our chart also shows how actual total pay (ie, not adjusted for inflation) increased from £2,760 to £2,919, £3,099 and £3,192 over that same period, increases of 5.8%, 6.2% and 3.0% respectively.

The increases in real pay over the course of 2023 and 2024 partly reflect a catch-up from the 4.9% real-terms fall seen in 2022 and the large minimum wage increases implemented in April 2024 that boosted pay for lower earners, while the real-terms fall in 2025 reflects a spike in inflation that eroded the value of pay awards over the course of the year. 

The good news for many employees is that average pay rises during 2026 are expected to be more than the 3.0% experienced last year just as inflation is coming down. This should in theory mean (at least on average) more disposable income that can be either spent or saved.

The Chancellor for one will be hoping that people go out and spend their pay rises this year, as she really needs a boost to the economy if she is to stay on course with her fiscal plans.

This chart was originally published by ICAEW.

ICAEW chart of the week: Business births and deaths in the UK

My chart for ICAEW this week looks at the cycle of business life since 2017, as the number of business births exceeded business deaths in 2025 for the second year in succession.

According to the Office for National Statistics (ONS), the number of businesses on the Inter-Departmental Business Register (IDBR) grew by 28,470 in 2025, comprising 313,715 business births less 285,245 business deaths. 

The IDBR is a database of 2.76m businesses in the UK that are registered for VAT or PAYE or which report turnover in their company filings, business credit reports or are otherwise identified as actively trading.

On 31 March 2025, when it stood at 2.73m, the register comprised 2,096,600 active companies, 380,520 sole proprietor enterprises, 160,865 partnerships, 84,000 charities and other not for profit organisations, and 12,630 public sector organisations.

Business births arise when businesses are added to the register, while deaths occur when businesses are dissolved, their turnover or employment falls to zero for several periods, or the ONS is otherwise notified that they are no longer trading.

As our chart this week illustrates there were a net 13,340 business creations in 2017 (338,625 business births – 325,285 business deaths), 35,275 in 2018 (340,150 – 304,875), 44,270 in 2019 (355,725 – 311,455), 13,665 in 2020 (321,990 – 308,325) and 9,385 (354,280 – 344,895) in 2021. There were a net 47,990 business destructions in 2022 (327,510 – 375,500) and 26,265 in 2023 (307,145 – 333,410), followed by net additions to the IDBR of 14,800 in 2024 (310,615 – 295,815) and 28,470 in 2025 (313,715 – 285,245).

These are equivalent to net changes of +0.5%, +1.3%, +1.6%, 0.5%, 0.3%, -1.7%, -1.0%, +0.5% and +1.0% in 2017 through to 2025 respectively. In 2025, this was made up of an increase of 11.5% less a decrease of 10.5% compared with the start of the year, highlighting the level of churn in the business register.

The net increase of 28,470 in 2025 comprised net increases of 5,035 professional, scientific and technical businesses, 4,400 in the real estate sector, 4,270 in accommodation and food services, 3,355 in retail, 3,000 in construction, 2,785 in transportation and storage, 2,615 in health and social care, 2,515 in arts, entertainment, recreation and other services, 1,645 in education, 1,420 in motor trades, 1,145 in business administration and support services, and 615 in finance and insurance. There were net reductions of 10 in wholesale businesses, 440 in information and communication, 790 in production, and 3,090 in agriculture, forestry and fishing.

The good news is that the number of UK businesses is starting to grow again, which may be a small spark of hope for the UK economy as we enter the second quarter of the 21st century.

This chart was originally published by ICAEW.

ICAEW chart of the week: Quarterly public sector finances

This week’s chart looks at how the government is relying on a strong inflow from self-assessment and employee bonuses to meet its revised fiscal targets for the financial year to March 2026.

Our chart this week illustrates the financial results for the UK public sector before net investment expenditure over the twelve quarters to March 2026, including the latest Office for Budget Responsibility (OBR) forecast for the final quarter.

According to the Office for National Statistics (ONS), the full-year current budget deficit – current receipts less current spending including depreciation – was £66bn in 2023/24 and £76bn in 2024/25, while the latest OBR forecast is for a current budget deficit of £52bn for 2025/26.

The current budget balance is different to the headline deficits of £135bn, £152bn and the OBR forecast of £138bn for 2023/24, 2024/25 and 2025/26 as deficits also include net investment spending of £69bn, £76bn and £86bn respectively.

Our chart breaks the current budget balance down by quarter, showing how there were current budget deficits of £44bn, £16bn and £27bn in the first three quarters of 2023/24 and a surplus of £21bn in the fourth quarter of 2023/24. This was followed by current budget deficits of £39bn, £22bn and £35bn and a current budget surplus of £20bn in 2024/25.

Current budget deficits of £50bn, £23bn and £22bn were reported for the first three quarters of the current financial year, with the OBR forecasting a current budget surplus of £42bn in the final quarter. This would bring the total current budget deficit to £53bn, £1bn more than the OBR’s November 2025 full-year forecast of £52bn because of variances in the third quarter.

As the chart illustrates, there is a £64bn swing between a current budget deficit of £22bn in the third quarter of 2025/26 to a current budget surplus of £42bn in the fourth quarter.

This quarter-on-quarter swing can be analysed between:

  • a £46bn contribution from 2024/25 self-assessment tax returns, most of which were submitted in January 2026 (£28bn income tax and £18bn capital gains tax);
  • £20bn from higher PAYE income tax and national insurance receipts (principally driven by employee bonuses and first calendar quarter pay rises);
  • £5bn from lower interest charges (as interest rates and inflation have fallen); less 
  • a net £7bn swing in all other receipts and expenditures across central and local government and public corporations.

The £64bn swing this year is higher than the £55bn swing between the third and fourth quarters of 2024/25. The difference is mainly due to an anticipated £7bn extra from capital gains taxes, principally driven by the rate increases that took effect in October 2024, half-way through the self-assessment tax return period. 

The lower current budget deficit in the third quarter compared with a year previously is primarily because of the employer national insurance tax rise from 1 April 2025. This rise also benefited the first quarter of 2025/26 but that was offset by much higher interest charges (principally on inflation-linked debt) amongst other drivers.

Some of the benefit of the swing in the current budget balance in the fourth quarter of the current financial year will be offset by higher net investment spending in the typical end-of-year ‘capital rush’. However, the achievement of the £138bn revised deficit forecast for the current year is primarily in the hands of the taxpayers who submitted their tax returns in January and how well employers operating on a calendar performance year basis did in 2025 and hence the bonuses that they will pay out by the end of March. 

We will hope to get a sense of the position in self-assessment tax returns when the January public sector finances are published by the ONS later this month, but we will likely need to wait until April (when the March public sector finances are published) to fully understand what is happening with bonuses.

This chart was originally published by ICAEW.

ICAEW chart of the week: Global stock markets

Our chart looks at how the top 10 stocks from nine companies made up more than a fifth of global stock market values on 31 December 2025.

Our chart this week is on equity markets around the world, illustrating how the 10,077 shares in the FTSE Global All Cap Index had a total market capitalisation of $103.6tn on 31 December 2025.

This can be analysed as $80.7tn (78% of the total) excluding the top 10 stocks and $22.9tn (22%) for the top 10 stocks.

Excluding the top nine US stocks, the Americas had a total market capitalisation of $46.9tn (45%). In Asia Pacific, excluding the largest non US stock, the total was $17.2tn (17%). Europe, the Middle East and Africa (EMEA) accounted for $16.2tn (16%).

The top 10 stocks are led by Nvidia, valued at $4.4tn (4.2% of the total global stock market capitalisation on 31 December 2025), followed by Apple at just over $3.9tn (3.8%), Microsoft on $3.6tn (3.5%), Alphabet A and C shares combined $3.3tn (3.2%), Amazon on $2.2tn (2.1%), Broadcom on $1.6tn (1.5%), Meta A shares on $1.4tn (1.4%), and Tesla on $1.3tn (1.2%).

The tenth stock (and ninth company) is that of Taiwan Semiconductor Manufacturing (TSM), which had a market capitalisation of $1.2tn (1.2% of the global total) on 31 December 2025.

The market capitalisations for Alphabet and Meta shown exclude the values of their non-traded B shares, which means their total equity values were closer to $4.0tn and $1.7tn respectively on 31 December 2025. The FTSE Global All Cap Index also doesn’t include the $1.6tn estimated market value of Saudi Aramco as less than 2.5% of this stock is traded.

If the top 10 stocks are included with their respective regions, the chart would show the Americas with a market capitalisation of $68.9tn (66% of the total), Asia-Pacific with $18.4tn (18%) and EMEA unchanged at $16.2tn (16%).

Not shown in the chart is how market capitalisations are distributed within each global region. The Americas comprise the US with $43.0tn (41.0%) excluding the top nine US stocks, or $64.7tn (62.0%) if they are included, Canada with $3.2tn (3.1%) and Latin America countries with $0.8tn (0.7%).

The market capitalisation of Asia-Pacific country stocks is led by Japan $5.8tn (5.6%), followed by China including Hong Kong with $3.9tn (3.7%), India $2.1tn (2.0%), Australia and New Zealand $1.8tn (1.7%), Korea $1.6tn (1.5%), Taiwan excluding TMS is $1.2tn (1.2%) and ASEAN nations $0.9tn (0.9%). Taiwan including TMS is $2.4tn (2.3%).

In EMEA, EU member country stocks add up to $9.3tn (9.0% of the total), the UK $3.4tn (3.3%), EFTA countries $2.3tn (2.2%), Middle East $1.1tn (1.1%) and Africa $0.4tn (0.4%).

As everyone investing in stock markets should know, individual share values can go down as well as up, which is why diversifying your investments often makes good sense.

However, in the case of global stock markets – and the US in particular – the total value of listed equities around the world are highly dependent on the fortunes (or otherwise) of just nine companies.

Be careful out there.

This chart was originally published by ICAEW.

ICAEW chart of the week: Australian Government balance sheet

My chart for ICAEW marks Australia Day by looking at the federal government balance sheet over the last decade.

My chart for ICAEW marks Australia Day by looking at the federal government balance sheet over the last decade.

Australia Day is on Monday 26 January, prompting us take a look at the Australian Government’s consolidated financial position over the last 10 years.

The chart is derived from federal government consolidated financial statements prepared in accordance with Australian Accounting Standards (as adjusted for prior period adjustments), divided by annual estimates of GDP in current prices published by the Australian Bureau of Statistics in October 2025.

The chart shows how net worth was negative throughout the period, going from 18% of GDP on 30 June 2015 to 23% on 30 June 2025.

Other key stats from the balance sheet

  • Non-financial assets going from 10% on 30 June 2015 to 11% on 30 June 2025
  • Financial assets going from 24% on 30 June 2015 to 27% on 30 June 2025
  • Interest bearing liabilities going from 28% on 30 June 2015 to 36% on 30 June 2025
  • Provisions and payables going from 24% on 30 June 2015 to 25% on 30 June 2025

Financial assets of AU$753bn on 30 June 2025 comprised of AU$570bn in financial investments, AU$174bn in receivables and accrued revenue, and AU$9bn in cash. While non-financial assets of AU$320bn comprised of AU$94bn in military equipment, AU$96bn in other plant, equipment and infrastructure, AU$79bn in land and buildings, AU$17bn in intangibles, AU$13bn in inventories, AU$13bn in heritage and cultural assets, and AU$8bn in other non-financial assets.

Interest bearing liabilities of AU$1,009bn on 30 June 2025 comprised of AU$679bn in government securities, AU$216bn in central bank and other deposit liabilities, AU$58bn in loans, AU$33bn in leases and AU$23bn in other interest-bearing liabilities. While provisions and payables of AU$696bn comprised of AU$411bn in pension liabilities, AU$103bn Australian currency in issue, AU$50bn in payables and AU$132bn in provisions.

Net worth was -AU$632bn on 30 June 2025 and GDP in the year to 30 June 2025 was AU$2,779bn. (Australian balance sheet to GDP ratios are based on GDP for the preceding 12 months, rather the UK practice of using ‘mid-year’ GDP from 6 months before to 6 months after the balance sheet date). 

Nominal GDP has increased by 70% or an average of 5.5% a year over the past decade, comprising inflation of 3.2% a year on average and average economic growth of 2.2% a year. The latter reflects average population growth of 1.5% per year and average per capita economic growth of 0.75% per year.

Not shown in the chart are revenues as a share of GDP respectively in the 10 financial years from 24% in 2015/16 to 27% in 2024/25, expenditure of 27% in 2015/16 to 29% in 2024/25, and net accounting (deficits)/surpluses as a share of GDP of (2.4%) in 2015/16 to (1.5%) to 2024/25. Net investment averaged 0.5% of GDP over the ten years.

This is of course not the full picture of the Australian public finances, as these numbers exclude approximately AU$1.7tn of positive net worth in the balance sheets of states and territory governments and local authorities across Australia.

Overall, Australia’s overall general government net debt – including states, territories and local government, but excluding illiquid financial assets, non-financial assets and non-debt liabilities – is reported to be around 32% of GDP in 2025. This compares with around 95% of GDP for the UK according to the IMF.

Apart from the pandemic years – when deficits rose and GDP fell in real terms – what is remarkable is how stable the Australian Government balance sheet has been over the last decade when compared with the size of the Australian economy. 

This has been partly down to the continued growth of Australia’s sovereign wealth funds (the Australia Future Funds) and the decision to close federal defined benefit pension schemes to new members in 2005 (non-military) and 2016 (military), slowing the growth in these liabilities. It also reflects a relatively prudent fiscal stance over the last few decades by successive governments.

For the Australian Government, this is a positive financial position to be in.

This chart was originally published by ICAEW.

ICAEW chart of the week: A peak in the civil service?

My chart for ICAEW this week looks at civil service numbers given that restructuring is in the air in Whitehall. Will the government really be able to deliver on its plans to cut administration costs and civil service headcount over the coming three years?

My chart for ICAEW this week takes a look at how the size of the civil service has risen, fallen, and risen again over the last 24 years. 

According to the Office for National Statistics (ONS), there were 518,000 civil servants or 492,000 full time equivalents (FTEs) in September 2001. This rose to 566,000 or 534,000 FTEs in September 2004, before gradually falling over the following decade or so to 416,000 or 384,000 FTEs in June 2016. Numbers started to increase from that point, rising to 554,000 or 520,000 FTEs in September 2025.

The decline in the number of civil servants during the Cameron-led coalition government between 2010 and 2015 reflected a concerted attempt to reduce costs, but the cuts were brought to a shuddering halt following the UK’s decision to leave the European Union. 

This saw civil numbers grow firstly to prepare for Brexit from the summer of 2016 onwards and then following the reverse economies of scale from the UK’s departure from the EU in January 2020 and from the EU single market and customs union in December 2020. Functions including trade relationships, customs, farm subsidies, regional economic development and multiple strands of regulation (economic, financial, food, medical, chemical etc) have all returned from Brussels, requiring more civil servants to deal with each. Although Covid boosted numbers further in 2020 and 2021, the rise has continued steadily since then as government departments have become even busier due to a range of factors, including rising numbers of immigrants and asylum seekers.

Our chart also shows how the ratio of civil servant FTEs to the population increased from 8.3 per thousand people in September 2001 to 8.9 in September 2004 and then fell to 5.9 in June 2016 before rising back to 7.5 per thousand in September 2025. This makes the increase since 2016 look a little less dramatic, as high levels of net inward migration has driven up the size of the population in recent years.

The civil service is the core policy and administrative staff working for central government departments and agencies (including those of the Scottish and Welsh governments) and is a subset of the 6.2m people (5.2m FTEs) who worked in the public sector in September 2025. This excludes the 2.3m employees (2.0m FTEs) of the NHS and other public health and social work services, the 1.7m people (1.2m FTEs) working in education, the 0.4m (0.4m FTEs) in the armed forces and police, and 1.3m (1.0m FTEs) total for council workers, employees of public corporations (such as the Post Office), and other public or crown servants.

The UK government set out a plan in the Spending Review 2025 covering the three financial years from 1 April 2026 to 31 March 2029 to cut administration budgets by 16% in real terms, with cuts in the numbers of civil servants expected to contribute a significant proportion of these savings. 

The National Audit Office estimates that around 8,500 civil servants are expected to leave the civil service by March 2027 under existing exit schemes, but this is likely to be only a small proportion of the total that will need to leave if the government is to be successful in its objective.

The peak in the size of the civil service has been called many times before, but this analysis (cautiously) suggests that the most likely peak will fall in either September 2025, December 2025 or March 2026, after which the civil service is expected to begin shrinking.

This chart was originally published by ICAEW.

ICAEW chart of the week: Budget 2025 Fiscal Insight

My chart for ICAEW this week returns to the scene of the Budget as it publishes an in-depth analysis written by me on its effect on the public finances and how it was ‘all about the headroom’.

Now that the dust has settled on November’s Budget, ICAEW has published a 20-page in-depth Fiscal Insight report written by me on the government’s most recent fiscal event and what it means for public finances.

One of the key conclusions of the report is that this Budget was ‘all about the headroom’, with the Chancellor’s tax rises almost entirely devoted to improving the buffer against potential adverse economic developments.

Although the government does not have an explicit long-term fiscal strategy, it does have medium-term strategic objectives to end the use of borrowing to fund current spending and to stop public debt from rising faster than the size of the economy. 

These aims are embodied in fiscal targets that are intended to provide confidence to debt markets about the government’s commitment to keeping public finances under control. The Chancellor’s primary ‘stability’ fiscal rule targets a current budget surplus by 2029/30 – the fourth year of the fiscal forecast period – as illustrated by Figure 3. 

In theory, this rule prevents the government borrowing to fund current spending and reduces the incentive inherent in previous fiscal rules to attempt to ‘balance the books’ by cutting investment.

Budget 2026 later this year will reduce the fiscal target to three years. This is a major improvement as it aligns with the three-year spending review period and hence should significantly reduce the scope for ‘playing with spreadsheets’ to meet fiscal targets. 

The tightening in this fiscal rule is accompanied by a slight relaxation in the target: instead of aiming for a current budget surplus, the rule now allows a maximum current budget deficit of up to 0.5% of GDP. This should provide the Chancellor with around £17bn in additional headroom on top of the existing £22bn she has this year, before taking account of changes in the fiscal forecasts or policy decisions in 2026.

This is likely to mean that her secondary fiscal rule – requiring projected debt to start falling by 2029/30 – will become more important in determining whether she will meet her fiscal commitments next year. 

It is generally accepted that the Chancellor left herself with too small a level of headroom against her fiscal rules in the Autumn Budget 2024. This left the government vulnerable to relatively small swings in economic circumstances and also constrained the government’s ability to spend more on defence or other emerging priorities.

The need to respond to a deterioration in the fiscal forecasts saw the Chancellor cut planned welfare spending in the Spring Statement, followed by hugely damaging speculation about potential tax rises in the run up to Budget 2025 following the overturning of those cuts by Labour MPs.

Although the level of headroom is still not that high by historical standards, the additional £17bn of headroom she is scheduled to benefit from in next year’s Budget should provide her with more resilience to weather further deteriorations in the economy if needed

This chart was originally published by ICAEW.

ICAEW chart of the week: Inflation

The Bank of England’s Christmas present to the nation of a cut in interest rates prompts my chart of the week for ICAEW to take a look at what is going under the hood of inflation.

According to the latest release from the Office for National Statistics (ONS), prices in the UK rose by 3.2% over the course of the 12 months to November 2025. 

My chart for ICAEW this week analyses this in more detail, breaking down the 3.2% annual rise in the consumer price inflation (CPI) index over the 12 months to November 2025. It shows that core inflation rose by 3.2%, while prices for food, alcohol and tobacco, and energy increased by 4.2%, 4.0% and 1.9% respectively.

Last year’s CPI was 2.6% in the year to November 2024, when core inflation, food, alcohol and tobacco, and energy inflation of 3.5%, 2.0%, 6.9% and -8.8% contributed 2.7%, 0.2%, 0.3% and -0.6% to the total increase respectively (taking into account their respective weightings). This compares to the 12 months to November 2025 – as shown in the chart – when core inflation, food, alcohol and tobacco, and energy inflation of 3.2%, 4.2%, 4.0% and 1.9% contributed 2.5%, 0.5%, 0.1% and 0.1% respectively to the total increase in the CPI.

Core inflation covers almost four-fifths of the goods and services that make up the CPI index and is therefore a better indicator of underlying trends, as it excludes food, alcohol and tobacco, and energy – some of more volatile components of consumer spending. The gradual trend downwards from 3.5% in the 12 months to November 2024 to 3.2% in the 12 months to November 2025 is therefore a positive sign that overall inflation is on its way back to being in the Bank of England’s target range of 2% plus or minus 1%.

However, there is still some concern about the rate of services inflation (a subcomponent of core inflation) which has remained relatively high at 4.4% in the 12 months to November 2025. While this is an improvement over the 5.0% comparative for a year ago, the Bank of England will want to see this come down further in the new year if they are going to go beyond the interest rate cut announced yesterday.

Many of our individual experiences of inflation are likely to feel worse than this given that food prices (including non-alcoholic beverages) have increased by 4.2% over the past 12 months, with some foodstuffs having increased by a lot more. According to the ONS, beef costs 27.7% more than a year ago, chocolate is up 17.3%, coffee is up 14.5% and butter is up 12.1% – all noticeable increases to most consumers. The positive news is that although annual food price inflation accelerated from 2.0% a year ago to a peak of 5.1% in the 12 months to August 2025, it has started to slow again since then.

Alcohol and tobacco prices constitute an even smaller component of the index (about 4% compared with the 11% represented by food) but are very visible to consumers who indulge. The positive news for those individuals is that the annual rate of increase in these prices has slowed from 6.9% a year ago to 4.0% in the 12 months to November 2025, with the latter comprising a 3.8% increase in the prices of alcoholic beverages and 4.2% in tobacco prices.

Energy comprises just over 6% of the overall index but its volatility can still have a significant influence on the overall index despite that weighting. This time last year energy prices had fallen by 8.8% over the previous 12 months, pulling down the overall rate of inflation by 0.6 percentage points. This year energy prices are up 1.9%, contributing 0.1% to the overall rise.

The good news was that the downward trend in inflation, particularly core inflation, was thought sufficiently positive to enable the Monetary Policy Committee (MPC) of the Bank of England to vote for a cut in interest rates in December. However, the close vote suggests that the MPC would like to see a further slowdown in the rate at which prices are rising before going further.

This chart was originally published by ICAEW.

ICAEW chart of the week: Net migration

Our chart this week illustrates the fall, rise and fall again of net inward migration over the past eight years and asks whether it will bounce back to hit the OBR’s long-term assumption by the end of the decade.

The eight-year period presented in our chart this week has seen significant change in the movement of people to and from the UK. The end of free movement for citizens of EU and EFTA countries (other than Ireland) after Brexit was followed by the introduction of a points-based immigration system, disruption to international movements of people caused by the pandemic, the resettlement of significant numbers of Ukrainians, Afghans and Hong Kong British Overseas Subjects, and then a clamp-down on immigration at the end of the last government that has continued under the current government.

These factors can be seen in the provisional and otherwise heavily caveated numbers from the Office for National Statistics (ONS) illustrated by the chart. Overall net inward migration fell from 216,000 and 224,000 in the years to June 2018 and 2019 to 111,000 in the year to June 2020, rose to 251,000, 681,000 and 924,000 in the years to June 2021, 2022, and 2023 respectively, and then fell to 649,000 and then 204,000 in the years to June 2024 and 2025. A net total over eight years of 3,260,000 additional people living in the UK.

Not shown on the chart are the gross totals for immigration and emigration over the eight years to June 2025, with the former adding up to +7,962,000 (757,000, 821,000, 736,000, 818,000, 1,167,000, 1,467,000, 1,299,000 and 897,000 respectively) and the latter to -4,702,000 (541,000, 597,000, 625,000, 567,000, 486,000, 543,000, 650,000 and 693,000).

The chart highlights net inward migration from outside the European Union single market area was a key driver over the eight years to June 2025 with 3,683,000 net additions to the UK population (142,000, 180,000, 115,000, 243,000, 750,000, 1,045,000, 825,000, and 383,000 respectively). Over the same period, net immigration from the EU and EFTA countries turned into net emigration, reducing the net additions to the UK population to 287,000 (+158,000, +126,000, +70,000, +95,000, -1,000, -30,000, -61,000 and -70,000), while there was a contraction and then expansion in the 710,000 net number of Brits leaving the UK to live abroad (84,000, 82,000, 74,000, 87,000, 68,000, 91,000, 115,000, and 109,000).

The large rise and then sharp fall in net inward migration in the last five years of the chart up to June 2025 was mainly driven by those coming from outside the EU and EFTA. Net inward migration in this group for work-related reasons (including dependents) increased and then fell over the five years to June 2025 (59,000, 184,000, 359,000, 381,000, 107,000), while those arriving for study-related reasons (including dependents) also rose and fell (59,000, 265,000, 382,000, 244,000, 144,000). 

Net long-term arrivals under resettlement schemes, principally from Hong Kong, Afghanistan and Ukraine, also rose and fell in the five years to June 2025 (10,000, 151,000, 125,000, 52,000 and 21,000), while the net inflow of asylum seekers increased over the same period (38,000, 70,000, 84,000, 77,000 and 90,000).

The chart includes the OBR’s long-term assumption in Budget 2025 for net inward migration to recover to 340,000 a year by the end of the five-year forecast period in 2030/31. As the OBR calculates that most immigrants make a net positive contribution to the UK economy in the years following their arrival, a lower net inflow of people into the UK than projected could have an adverse impact on the amount of headroom the Chancellor has against her fiscal rules.

So, while ministers and civil servants at the Home Office may be congratulating themselves about the sharp fall in the number of people coming to live in the UK, their colleagues at HM Treasury may be less cheerful.