UK inflation rises to four-month high as energy bills climb

UK inflation rose to 2.9% in the 12 months to July, reaching its highest level for four months as higher household energy costs pushed prices up. The latest figures show gas prices rising at the fastest pace in almost four years, according to the Office for National Statistics. The increase comes after Ofgem raised the household gas and electricity price cap on 1 July, lifting typical annual bills by £221.

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The energy regulator's 13% cap increase was the main immediate driver of the move, with the ONS saying higher energy bills fed directly into the monthly reading. The figures also showed that some other price pressures eased, including food inflation, which fell to 1.3% and is at its lowest level for close to five years. ONS prices director Mike Hardie said furniture prices fell by less than usual for the time of year, while clothing was also not being discounted as much.

The rise in inflation is significant because it affects household spending power at a time when many families are already facing higher living costs. It also matters for monetary policy, although experts quoted in the report said the reading is unlikely to prompt the Bank of England to change interest rates at its next meeting in September. The data therefore points to a mixed picture for the economy, with easing in some areas but renewed pressure from energy.

The report links the jump in energy prices to wider global market disruption, including the conflict between the United States and Iran, which has restricted oil supplies and affected energy markets. Cornwall Insight said energy bills are forecast to rise by a further 4% from October, which could take them to their highest level since July 2023. The consultancy said uncertainty over the conflict and a heatwave across Europe were adding to gas demand for power generation, as well as for air conditioning and cooling.

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The political response has already begun. Chancellor John Healey said the Iran war was continuing to affect prices in the United Kingdom, while arguing that the economy remained resilient. He said the government had cut VAT on electricity bills and capped bus fares at £2 to help households under pressure.

Shadow chancellor Mel Stride said the country was unprepared for global shocks and accused Labour of mismanagement, saying ordinary people were paying the price. What remains unclear is how long the current energy-driven pressure on inflation will last and whether the forecast October increase will be confirmed. The next key watchpoint is whether global energy markets stabilise enough to ease household bills later in the year.

For now, the July figures suggest that energy costs remain the main force pushing UK inflation higher, even as some other prices cool.

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