UK inflation climbed back above 3% in August as sharply higher fuel and transport costs fed through to consumer prices, while manufacturers faced a renewed increase in the cost of materials and energy.
The Consumer Prices Index rose by 3.1% in the 12 months to August, up from 2.9% in July and 2.6% in June, according to the Office for National Statistics. Prices increased by 0.5% during August alone, compared with a 0.3% monthly rise in August last year.
Transport made the largest upward contribution to the change in inflation, led by motor fuels. Average petrol prices rose by 9.1p during August to 161.3p a litre, while diesel increased by 14.2p to 181.8p. Motor fuel prices were 23.0% higher than a year earlier.
Air fares added further pressure, rising by 6.2% between July and August, with long-haul routes making a notable contribution. Transport prices overall increased by 1.5% during the month and were 4.6% higher than a year earlier, accelerating from an annual rate of 3.6% in July.
Energy costs were also evident elsewhere in the inflation basket. Electricity, gas, and other fuels contributed to higher housing and household services prices, while food and non-alcoholic beverage inflation remained at 1.3%.
The rise was concentrated rather than broad-based. Core CPI, which excludes energy, food, alcohol, and tobacco, remained unchanged at 2.6%, while services inflation held at 3.4%. Goods inflation, by contrast, increased from 2.2% to 2.7%.
That split will be closely watched by the Bank of England, which has been assessing whether higher global energy prices are beginning to feed into domestic wage and price-setting. August brought a clear increase in the headline rate, but no corresponding acceleration in core or services inflation.
Inflation also remains below the 3.8% recorded in August 2025, despite rising by half a percentage point since June. The comparable August rate was 2.2% in 2024, 6.7% in 2023, and 9.9% in 2022, when the earlier energy and cost-of-living shock was approaching its peak.
Business cost pressure builds upstream —
Producer-price figures released alongside the consumer data show a more pronounced increase in costs moving through manufacturing and supply chains.
Prices paid by UK manufacturers for materials and fuels were 6.1% higher in August than a year earlier, while factory-gate prices charged by manufacturers increased by 3.7%. Crude-oil input prices were 26.7% higher year-on-year, while the price of coke and refined petroleum products leaving factories was 49.1% above its level a year earlier.
The figures point to growing exposure for businesses reliant on road transport, freight, energy-intensive production, petroleum-derived materials, and imported or multi-stage supply chains. Persistent increases in those costs can put pressure on operating margins, procurement budgets, investment decisions, and ultimately the prices businesses charge their customers.
Companies have not yet responded by substantially raising their expectations for future price increases. The Bank of England’s August Decision Maker Panel found that businesses expected their own prices to rise by 3.8% over the following year, down 0.1 percentage points from the previous survey. Their expectations for CPI inflation over the same period fell from 3.4% to 3.1%.
The labour market is providing a further counterweight to the latest rise in prices. ONS figures released this week showed regular earnings growing by 3.5% in the three months to July, following a year in which pay growth had slowed. Total earnings growth eased to 3.9%.
Vacancies fell to 702,000 in the three months to August, down 8,000 on the quarter and 36,000 over the year. Outside the pandemic period, the last time the number was at or below that level was in 2014. There were 2.5 unemployed people for each vacancy in the three months to July, while provisional payroll estimates showed employee numbers falling again in August.
The ONS said feedback from its vacancy survey continued to suggest that smaller businesses may be holding back recruitment because of higher labour costs. Softer hiring conditions and slower wage growth could, however, make it harder for the current energy-driven increase in prices to develop into sustained domestic inflation.
Those competing pressures will frame the Monetary Policy Committee’s next interest rate decision on Thursday. Bank Rate stands at 3.75%, after six of the nine committee members voted to hold rates in July and three supported an increase to 4%.
The Bank had already expected inflation to rise during the second half of 2026 as higher energy prices passed through to households and businesses. Its July assessment said there was little evidence at that stage of material second-round effects in wages and prices, adding that “there have continued to be clear signs of underlying disinflation in recent data”.
August’s figures leave that assessment under greater pressure without overturning it. Consumers are paying considerably more for fuel, manufacturers are facing faster input-price growth, and higher energy costs are moving through transport and production. Core inflation and services inflation have nevertheless remained stable, while pay growth and recruitment conditions have softened.
The next test will be how long elevated energy costs persist and how extensively they pass through supply chains. If manufacturers and transport-intensive businesses continue absorbing higher costs without materially lifting selling prices, the current increase could remain concentrated. A wider pass-through into company pricing, wages, and services would present the Bank with a more persistent inflation problem.
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