The Office for National Statistics (ONS) has confirmed that inflation rose to 3.8% in July. At first glance, that sounds like a worrying development for households and businesses. But before assuming the worst, it’s worth looking a little closer at the figures.

In line with expectations

The Bank of England had forecast inflation of 3.76% for July, so the actual figure is very close. While some headlines highlight the “unexpected” rise, it is broadly consistent with what economists were predicting. The Bank still expects inflation to peak at around 4% in September, before easing in the autumn.

The role of air fares

One of the biggest drivers behind the jump was air fares. Prices rose more than 30% between June and July 2025 – the steepest monthly rise since records began in 2001. The reason, according to the ONS, was the timing of school holidays. In 2024, fares were recorded during term time. This year, the data was gathered during the school holidays, when demand and prices are naturally higher.

This suggests that at least part of the increase is a one-off effect, rather than a sign of a longer-term trend.

Food costs still creeping up

Food prices also played a role. Items like coffee, orange juice, meat and chocolate saw notable rises. Food inflation is now at 4.9% – its fourth monthly increase and the highest since February 2024. For businesses such as cafés and restaurants, these cost pressures are very real. Margins remain under strain, and many owners face tough decisions about pricing.

Looking ahead

The economics director at the Institute of Chartered Accountants in England and Wales, Suren Thiru, has warned that inflation could rise above the Bank of England’s predicted 4% peak, given higher business costs and global food prices. However, he still expects inflation to ease later in the year.

What does this mean for businesses?

While times remain challenging, particularly in sectors reliant on food, the latest figures don’t suggest a sharp change in the wider economic outlook. Inflation is still moving along the path the Bank of England expected, even if the journey is a little bumpy.

For most businesses, the message is to keep a close eye on costs, but not to overreact to a single month’s data. The rise in air fares may grab headlines, but it doesn’t necessarily change the bigger picture.

See: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest