UK inflation rises to 3.1% as higher fuel costs add pressure on businesses

UK inflation increased to 3.1% in August as higher petrol and diesel prices added to price pressures, raising further questions over the outlook for interest rates and business costs.

The Consumer Prices Index (CPI) rose by 3.1% in the 12 months to August 2026, up from 2.9% in July, according to the latest figures from the Office for National Statistics (ONS).

On a monthly basis, CPI increased by 0.5% in August, compared with a 0.3% rise in the same month last year.

Transport, and motor fuels in particular, made the largest upward contribution to the change in the annual inflation rate, as higher oil prices fed through to petrol and diesel costs. The increase has implications for businesses operating vehicle fleets and asset-intensive companies facing higher transport and operating costs.

The broader Consumer Prices Index including owner occupiers’ housing costs (CPIH) increased by 3.3% in the 12 months to August, up from 3.1% in July.

Underlying inflation measures were more stable. Core CPI, which excludes energy, food, alcohol and tobacco, remained unchanged at 2.6%, while services inflation also held steady at 3.4%. However, the annual inflation rate for goods increased from 2.2% to 2.7%.

The latest figures come ahead of the Bank of England’s interest rate decision on Thursday, with the renewed increase in headline inflation adding to the factors policymakers will consider when assessing the path for monetary policy.

For SMEs, the combination of higher fuel and other input costs and borrowing costs remains an important consideration for investment and growth plans.

Mike Randall, CEO of Simply Asset Finance, said: “As the days get shorter and autumn approaches, a fresh uptick in inflation risks casting a longer shadow over SME confidence.

“While businesses remain optimistic, we need to avoid rising costs, softer demand and continued uncertainty chipping away at ambition and putting the brakes on growth.

“Tackling this will need decisive action from the new Government. This means proving that it can deliver tangible support that helps businesses invest with confidence, rather than more promises that fail to shift conditions on the ground.”

Neil Rudge, Chief Banking Officer at Shawbrook, highlighted the pressure that continued inflation could place on medium-sized businesses.

“When inflation ticks up, the conversation rightly turns to households. But there is another group that barely gets a mention. Medium-sized businesses are the shock absorbers of the UK economy, absorbing higher input costs while trying to limit the impact on their customers and employees. That often means tighter margins, delayed investment and harder choices.

“If inflationary pressure persists, it is this critical middle that will quietly carry much of the load. Their contribution, and the trade-offs they are making, deserve far more attention than they currently receive.”