UK inflation sinks to 0.2% on virus stimulus

British inflation sank close to zero in August on state coronavirus stimulus measures, including a restaurant discount scheme and tax cuts, as well as plunging air fares, data showed Wednesday.

The annual inflation rate, as measured by the UK's Consumer Prices Index, dived to just 0.2 per cent in August from 1.0 per cent in July, the Office for National Statistics (ONS) said in a statement.

"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," said ONS deputy national statistician Jonathan Athow.

"For the first time since records began, air fares 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," he added. 

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The "Eat Out to Help Out" incentive -- which was valid Monday to Wednesday throughout August -- saw the UK government contribute 50 per cent of the cost of a cafe, restaurant or pub meal, up to £10 ($13, 11 euros) per person.

Britain also slashed valued-add tax on the virus-plagued hospitality sector from 20 per cent to just five per cent.

The tax cut and restaurant scheme were launched by finance minister Rishi Sunak to try to kick-start the British economy, which has been devastated by the pandemic.

Adding to downwards inflationary pressure in August, airlines slashed their ticket prices in the face of evaporating travel demand during the deadly Covid-19 pandemic.

Agence France-Presse