UK inflation rose to 2.9 per cent in July as higher household energy costs pushed prices upwards, increasing pressure on businesses already concerned about rising operating costs.

The Consumer Prices Index increased by 2.9 per cent in the 12 months to July, up from 2.6 per cent in June, according to the Office for National Statistics. It marked the first increase in the annual rate since March. Prices rose 0.3 per cent during the month, compared with 0.1 per cent in July last year.

The broader CPIH measure, which includes owner-occupiers' housing costs, increased from 2.8 per cent to 3.1 per cent. Housing and household services made the largest upward contribution to the change, driven particularly by gas and electricity.

Gas prices jumped 14.7 per cent during July, the largest monthly increase since October 2022, while electricity prices rose 3.6 per cent. The increases followed a rise in Ofgem's household energy price cap, which was partly caused by higher wholesale prices following the outbreak of conflict in the Middle East.

There were signs that underlying price pressures remained more contained. Core CPI, which excludes energy, food, alcohol and tobacco, was unchanged at 2.6 per cent, while services inflation eased from 3.6 per cent to 3.4 per cent.

The Bank of England has warned that inflation is likely to rise further during the remainder of 2026 as higher global energy costs feed through to household bills and corporate supply chains. Its latest central forecast expects CPI inflation to reach 3.2 per cent in October and November before easing slightly. The Bank held its benchmark interest rate at 3.75 per cent in July.

Caterina Batog, research and economics analyst at the British Chambers of Commerce, said businesses "continued to feel the heat from inflation" and warned that energy remained a particular concern because companies were not protected by the household price cap.

The BCC said 66 per cent of businesses identified inflation as a concern during the second quarter.

Batog called on the government to use the Autumn Budget to reduce business costs and introduce measures designed to increase trade, investment and productivity, warning that squeezed margins were weighing on companies' investment and recruitment plans.