Responding to the UK inflation figures for July 2026, released by the Office for National Statistics today (Wednesday 19 August 2026), Suren Thiru, ICAEW Chief Economist, said:
“The financial squeeze on households and businesses is intensifying once more, with July's energy-led reacceleration in inflation, driven by Ofgem's price cap increase, underscoring how elusive price stability remains.
“July’s uptick is unlikely to be a one-off, with drought-related increases in food prices and surging energy costs raising the prospect of inflation topping 3.5% later this year, especially if disruption in the Strait of Hormuz persists.
"Rising inflation is likely to become the biggest threat to UK growth in the coming months as it eats into household budgets by increasing the cost of essentials, while also raising government borrowing costs and eroding the Chancellor’s fiscal headroom ahead of October’s Budget.
"Softer services inflation is unlikely to reassure the Bank of England as it appears to reflect the temporary VAT cut on family attractions and children’s meals, rather than a genuine cooling in underlying price pressures.
"While July’s hotter inflation reading is unlikely to trigger a September rate rise, given the dampening effect of a softer labour market on underlying price pressures, it does reignite the prospect of further policy tightening before the end of the year."
ENDS
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