Your energy bill just pushed UK inflation back up
Key Points
- UK CPI inflation rose to 2.9% in the 12 months to July 2026, up from 2.6% in June.
- The July Ofgem price cap took the average annual dual-fuel direct debit bill to £1,862, a rise of £221.
- Gas prices rose 14.7% in the month, the largest rise since October 2022; electricity rose 3.6%.
- Falling diesel and petrol prices and flat food prices partly offset the increase.
- Core inflation held at 2.6% and services inflation eased to 3.4%.
UK inflation rose to 2.9% in the 12 months to July, up from 2.6% in June, after the summer energy price cap added £221 to the average annual dual-fuel bill.
Gas prices rose 14.7% over the month, against a fall of 7.2% in July last year. That was the largest monthly rise since October 2022, when UK households first felt the energy crisis triggered by the war in Ukraine, and it leaves gas prices at their highest level since March 2024. Electricity prices rose 3.6% in July, compared with a fall of 3.8% a year ago.
Ofgem’s cap for July to September took an average annual dual-fuel bill paid by direct debit to £1,862.
The regulator sets the cap using a 12-week assessment window, which for this quarter ran from 18 February to 18 May, the first such period affected by the outbreak of the conflict in the Middle East. Higher wholesale prices fed through to standard variable tariffs from July.
Housing and household services inflation reached 4.1% in the year to July, up from 2.7% in June, and contributed more to the rise in the headline rate than any other category. Prices in the division rose 0.9% over the month, against a fall of 0.4% in July 2025.
Falling fuel costs took the edge off the increase. Transport inflation slowed to 3.6% from 5.7%, with diesel down 8.8 pence per litre over the month to an average of 167.6 pence, and petrol down 3.1 pence to 152.2 pence.
Motor fuel prices remain 15.5% higher than a year ago, down from an annual rate of 21.3% in June.
Food and non-alcoholic drink prices were flat over the month and 1.3% higher over the year, the lowest annual rate since September 2021. Cheaper meat, particularly beef and breaded chicken, and cheaper vegetables drove the fall. Bread, cereals and fish moved the other way.
Core inflation, which excludes energy, food, alcohol and tobacco, held at 2.6%. Services inflation eased to 3.4% from 3.6%. CPIH, which includes owner occupiers’ housing costs and Council Tax, rose 3.1% over the year, up from 2.8%.
“The good news is that underlying pressures are still easing, with services inflation continuing to fall,” said James Smith, chief economist at the Resolution Foundation. The think tank expects inflation to peak at around 3.2% towards the end of the year.
