How a 0.1% Data Error Shook Confidence in UK Inflation Figures

May 2025, the United Kingdom’s Office for National Statistics (ONS) publicly admitted that it had overstated the official consumer price index (CPI) inflation rate for April. The discrepancy—just 0.1 percentage point, pushing the figure from an actual 3.4% to a reported 3.5%—was caused by incorrect vehicle excise duty (VED) data provided by the Department for Transport. While seemingly minor, the implications of this error are anything but trivial. It is the latest in a string of mistakes that have raised serious questions about the reliability of UK economic statistics, especially at a time when policymakers, investors, and businesses depend on them for critical decision-making.

Market Reactions and Monetary Policy Confusion

The inflation error had immediate consequences in financial markets. April’s inflation figure was sharply higher than forecast, leading traders to scale back expectations of interest rate cuts from the Bank of England (BoE). Believing that inflationary pressures were more persistent than anticipated, markets moved to price in a longer period of tight monetary policy.

This change in sentiment was reflected in bond yields and currency movements, as investors recalibrated their forecasts in light of the apparently strong inflation data. Analysts now know that these reactions were based on flawed inputs. Even a 0.1% difference in CPI matters significantly when it pushes a number above a psychological threshold or diverges from the central bank’s own forecasts, which had anticipated a 3.4% figure.

In effect, incorrect data distorted the policy conversation, potentially delaying rate cuts that could have supported economic growth and dampened recession risks.

Quantitative Illustration of Impact

Implication	Nature of Impact	Likely Magnitude (Illustrative)
Monetary policy stance	Delay in rate cuts	Potential months-long delay
Bond market costs	Temporary increased borrowing cost	Millions (£) extra in short-term interest
Government indexed payments	Higher indexed payouts	Tens of millions (£) in fiscal impact
Wage negotiations	Overestimated wage adjustments	Incremental pressure on labor costs
Institutional credibility	Loss of public trust in official data	Long-term intangible cost

Fiscal Implications: Small Errors, Big Costs

Inflation figures don’t just inform monetary policy—they also drive government payments indexed to CPI or the Retail Price Index (RPI). This includes inflation-linked bonds (gilts), pensions, and welfare benefits. A 0.1% overstatement, when applied to hundreds of billions of pounds in indexed liabilities, translates into tens of millions in excess public spending.

While the ONS has stated that it will not revise the April inflation number retrospectively, it will use corrected data from May onwards. This means the fiscal impact of the April error will remain embedded in indexed outflows. The Treasury will pay marginally more on gilts and transfer slightly higher payments to households than warranted—a real financial cost from a data oversight.

Corporate Planning and Wage Setting

The CPI also plays a role in the private sector, particularly in wage negotiations, price setting, and business planning. Trade unions and employers often use official inflation statistics as benchmarks in salary reviews. An overstated figure could lead to higher-than-necessary wage demands, raising labor costs and potentially fueling a second-round inflation effect.

In the retail and services sectors, firms base strategic decisions on expected inflation paths. A higher reported CPI may have led businesses to raise prices or defer investment under the mistaken belief that demand was being eroded by faster cost-of-living increases. This misalignment could, in turn, affect employment, pricing, and competitiveness, even if only temporarily.

Credibility Crisis at the ONS

The most serious long-term implication, however, may be the erosion of public and institutional trust. The inflation misstatement comes on the heels of multiple other statistical errors, including the suspension of the Producer Price Index in March and longstanding problems in the Labour Force Survey.

This accumulation of mistakes has prompted a government probe, and the ONS currently lacks a permanent National Statistician following the resignation of Sir Ian Diamond. These governance gaps compound concerns about statistical oversight, data validation, and accountability.

Critics, including former Treasury advisers, have openly questioned how such fundamental figures—CPI and RPI—could be compromised by avoidable input errors. “These are the most important statistics,” one commented. “They affect everyone, from pensioners to financial markets, and must be double and triple checked.”

Wider Economic and Policy Risks

Beyond fiscal and financial markets, bad data has broader consequences. The Office for Budget Responsibility, as well as countless think tanks and private analysts, base macroeconomic forecasts on official inflation figures. An incorrect baseline undermines all downstream projections: from expected tax receipts to projected deficits and debt ratios.

This isn’t just a technical failure—it’s a policy problem. Mistakes in headline indicators distort the very narrative of economic health, creating misperceptions among citizens, investors, and foreign observers. Over time, this chips away at the UK’s reputation for statistical reliability—once considered among the best globally.

Conclusion: The Cost of Inaccuracy

The ONS’s 0.1 percentage point inflation error may seem minor in isolation, but its ripple effects are significant. From financial markets and monetary policy to public finances and business decisions, the episode demonstrates just how dependent modern economies are on accurate data. As inflation and interest rates remain central to economic outcomes in 2025, the UK cannot afford further lapses.

This incident should serve as a wake-up call to strengthen quality assurance processes, improve coordination between departments, and rebuild institutional credibility. After all, in economics—as in aviation—even a small misreading of the instruments can lead to disastrous decisions.