UK Inflation Update: What the November 2025 Figures Mean for 2026

The latest inflation figures from the Office for National Statistics (ONS) offer a clear overview of the UK economy as we start 2026. Although inflation continues to ease, it remains above the Bank of England’s long-term target, with ongoing implications for interest rates, household finances and business planning. This update outlines the key points from the November 2025 data and explains why they are relevant for individuals and business owners.

The ONS reported that headline inflation slowed again. The Consumer Prices Index (CPI), which excludes housing costs, was 3.2%, down from 3.6% from the previous month. The broader measure that includes owner-occupiers’ housing costs (CPIH) rose by 3.5% over the year to November, down from 3.8% in October.  Both figures point to slower price growth compared with earlier in the year.

Food and non-alcoholic beverages, and alcohol and tobacco made the largest downward contributions to the monthly change in both CPIH and CPI annual rates.

Overall, the data suggest inflation is trending downward but remains above the Bank of England’s 2% target. That context will be relevant for discussions about interest rate policy and the cost pressures facing households and businesses heading into 2026.

What Does This Mean For Business?

Costs and pricing

Slower inflation should mean input costs such as energy, stock and transport rise less quickly than they did in previous years. That makes budgeting more predictable. However, many suppliers are still operating with higher cost bases, so prices are unlikely to fall meaningfully. Small businesses may still face tough decisions around pricing, especially where customers remain price-sensitive.

Interest rates and borrowing

Because inflation remains above the Bank of England’s target, interest rates are likely to stay higher for longer than many businesses would prefer. This affects loan repayments, overdrafts and new borrowing. For small businesses relying on finance to manage cash flow or invest in growth, this keeps the cost of borrowing elevated.

Cash flow and demand

Households continue to feel the impact of higher prices, even as inflation slows. This can affect consumer spending, particularly for discretionary goods and services. Small businesses may see cautious customer behaviour and longer payment times, making cash flow management especially important.

Planning and resilience

The current environment rewards careful planning. Regular cash flow forecasting, reviewing cost structures and keeping pricing under review can help businesses stay resilient. While the direction of travel on inflation is encouraging, uncertainty around rates and demand means businesses should avoid complacency.

Inflation Is Falling, But Challenges Remain

November’s figures reinforce the message we have been seeing for several months: inflationary pressure is easing, but the effects of higher prices are still being felt. For households, this may bring some gradual relief as price growth slows. For businesses, especially SMEs, it remains important to plan carefully around costs, pricing decisions and cash flow.

Source: ONS