UK Inflation Rises to 3.1% in August 2026: What Does It Mean for Households and Businesses?
The Office for National Statistics (ONS) reported this month that UK's annual rate of inflation increased in August 2026, with the Consumer Prices Index (CPI) rising to 3.1%.
The increase means inflation is now above the Bank of England's 2% target and has risen for a second consecutive month. The ONS reported that CPI increased from 2.9% in July to 3.1% in August 2026.
For businesses and households, the latest figures highlight continued pressure from transport, housing and other household costs.
Key takeaways
UK CPI inflation increased from 2.9% to 3.1% in August 2026.
CPIH increased from 3.1% to 3.3%.
Transport was the largest upward contributor to the latest increase.
Motor fuel prices rose sharply, with petrol reaching an average of 161.3p per litre.
Housing and household services inflation increased to 4.3%.
Food inflation remained at 1.3%.
Core CPI remained unchanged at 2.6%.
Businesses should continue to monitor costs, margins and cash flow as prices remain elevated.
Key inflation figures for August 2026
The latest ONS data shows:
Measure | July 2026 | August 2026 |
CPI annual inflation | 2.9% | 3.1% |
CPIH annual inflation | 3.1% | 3.3% |
CPI monthly change | 0.3% | 0.5% |
CPIH monthly change | 0.3% | 0.5% |
Core CPI | 2.6% | 2.6% |
CPI services inflation | 3.4% | 3.4% |
CPIH, which includes owner occupiers' housing costs and is described by the ONS as its most comprehensive measure of inflation, rose to 3.3% in August.
Why has UK inflation increased?
The biggest upward contribution to the change in inflation came from transport, particularly motor fuel.
Transport prices increased by 4.6% in the year to August, compared with 3.6% in July. On a monthly basis, transport prices increased by 1.5% in August.
Motor fuel was a particularly significant factor. The average price of petrol increased by 9.1 pence per litre between July and August, reaching 161.3 pence per litre. Diesel increased by 14.2 pence per litre to an average of 181.8 pence per litre.
Overall, motor fuel prices were 23.0% higher than a year earlier.
For businesses that rely on vehicles, deliveries or regular travel, higher fuel costs can feed into operating and distribution costs.
Housing costs remain an important part of inflation
Housing and household services inflation increased from 4.1% in July to 4.3% in August.
Owner occupiers' housing costs rose by 3.9% over the 12 months to August, up from 3.7% in July. Electricity, gas and other fuel prices also increased during the month, with the annual rate for this category reaching 6.0%.
Housing and household services have remained the largest contributor to the overall CPIH inflation rate for more than two years, according to the ONS.
What is happening to food prices?
There is some more stability in food price inflation.
Food and non-alcoholic beverage prices increased by 1.3% in the year to August 2026, unchanged from July. Prices increased by 0.4% during August, the same monthly increase recorded in August 2025.
The contribution from food and non-alcoholic beverages to overall CPIH inflation was 0.11 percentage points in August. The ONS says this was the smallest contribution from food since September 2021.
What does the latest inflation rate mean for small businesses?
Inflation affects businesses in several ways. Rising prices can increase the cost of running a business, including fuel, energy, supplies, services and wages.
At the same time, businesses need to consider how much of these increased costs can be passed on to customers without affecting demand.
The August figures are particularly relevant for businesses with significant transport costs, as motor fuel prices were a major contributor to the latest increase in inflation.
Businesses should therefore continue to monitor their cash flow, margins, operating costs and pricing rather than looking at turnover alone.
For small businesses, regular financial reporting can help identify where rising costs are affecting profitability and whether changes to pricing or spending may be necessary.
Is inflation still above the Bank of England's target?
Yes. CPI inflation was 3.1% in August 2026, compared with the Bank of England's 2% inflation target.
However, it is important to distinguish between the annual inflation rate and the change in prices themselves. A fall in the inflation rate does not mean prices are falling. It means prices are increasing more slowly than before.
With CPI now at 3.1%, prices are continuing to rise, although the rate at which they are increasing has changed over time.
What is core inflation?
Core inflation removes energy, food, alcohol and tobacco from the calculation. It is often used to provide another view of underlying price pressures.
In August 2026, core CPI remained at 2.6%, unchanged from July.
Core CPIH was also unchanged at 2.9%. Services inflation remained at 3.4% on the CPI measure, while CPIH services inflation remained at 3.6%.
This means the increase in headline inflation in August was not accompanied by an increase in core CPI.
What should businesses be doing?
The latest inflation figures are a useful reminder for businesses to keep their finances under review.
Businesses may wish to consider:
Reviewing operating costs and supplier prices
Monitoring fuel and energy expenditure
Checking profit margins rather than focusing solely on revenue
Reviewing pricing where costs have increased
Keeping cash-flow forecasts up to date
Planning for upcoming tax and other financial commitments
Reviewing budgets regularly as costs change
Good financial information can help business owners understand how changes in the wider economy are affecting their own business.
How can an accountant help?
Inflation, changing costs and higher operating expenses can make financial planning more difficult, particularly for small businesses.
An accountant can help you understand your business's financial position, monitor cash flow, review profitability and plan for upcoming tax liabilities.
Get in touch with the Styles & Associates team to discuss your requirements and request a quote for our accounting services.
Frequently asked questions
What is the UK inflation rate in August 2026?
The UK CPI inflation rate was 3.1% in August 2026, up from 2.9% in July.
Why did UK inflation rise in August 2026?
Transport, particularly motor fuel, made the largest upward contribution to the increase in the annual inflation rate.
What is CPIH inflation in August 2026?
CPIH inflation was 3.3% in August 2026, up from 3.1% in July. CPIH includes owner occupiers' housing costs and is the ONS's most comprehensive measure of consumer price inflation.
Is food inflation rising in the UK?
Food and non-alcoholic beverage inflation was 1.3% in August 2026, unchanged from July.
What is core inflation in August 2026?
Core CPI inflation was 2.6% in August 2026, unchanged from July. Core inflation excludes energy, food, alcohol and tobacco.
How can inflation affect a small business?
Inflation can increase the cost of fuel, energy, supplies, services and other business expenses. Businesses may need to monitor margins, cash flow and pricing to understand how changing costs are affecting profitability.
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