UK consumers are feeling the pinch once again as the nation’s inflation rate surged higher than expected in July 2025, pushed up by soaring travel costs and stubbornly rising food prices. According to the Office for National Statistics (ONS), the Consumer Prices Index (CPI) inflation rate climbed to 3.8% in July, up from 3.6% in June, marking the highest level since January 2024, when inflation hit 4%. This latest jump has left many households bracing for more expensive months ahead, especially as the Bank of England warns that inflation could peak at 4% in September before any relief begins to materialize.
The official figures, released on August 20, 2025, reveal that the main culprit behind the inflation spike was a dramatic surge in air fares. Families booking summer holidays during the school break drove up demand, and airlines responded with the biggest monthly jump in flight prices since the ONS began collecting monthly data in 2001. Air fares soared by a staggering 30.2% between June and July, a record-breaking leap that caught even seasoned economists off guard.
Grant Fitzner, the ONS’s chief economist, explained the situation plainly: “The main driver was a hefty increase in air fares, the largest July rise since collection of air fares changed from quarterly to monthly in 2001. This increase was likely due to the timing of this year’s school holidays.” He added that petrol and diesel prices also climbed in July, in stark contrast to price drops seen this time last year. The average petrol price rose by 2 pence per litre, and diesel by 2.9 pence per litre between June and July, piling further pressure on drivers already grappling with the cost-of-living crisis.
It wasn’t just travel that got more expensive. The ONS reported that food and drink inflation rose to 4.9% in July, up from 4.5% in June, marking the fourth consecutive month of increases and the highest annual rate since February 2024. Items such as coffee, fresh orange juice, meat, and chocolate saw some of the steepest price hikes. Fitzner noted, “Food price inflation continues to climb – with items such as coffee, fresh orange juice, meat and chocolate seeing the biggest rises.”
Restaurants and hotels also hiked their prices, largely driven by a jump in overnight hotel stays booked at the last minute. The ONS’s preferred inflation measure, the Consumer Prices Index including owner occupiers’ housing costs (CPIH), also edged up to 4.2% in July from 4.1% in June. Meanwhile, the Retail Prices Index (RPI) inflation rate, which is often used to set regulated train fare increases, rose to 4.8% from 4.4% over the same period.
These rising numbers are not just abstract statistics—they have real-world consequences for millions of Britons. Kris Hamer, director of insight for the British Retail Consortium, highlighted the impact on everyday life: “Households are once again seeing the cost of their weekly shop climb, with food inflation now up by 1.9 percentage points in just four months. This surge has been a key driver behind headline inflation, alongside a rise in transport costs, piling fresh pressure on families already being forced to cut back.”
While there was some “limited relief” for shoppers—clothing and footwear inflation eased, and prices for items like olive oil, butter, and cheese fell month-on-month—these small comforts were overshadowed by the broader trends. Hamer also pointed out that government policies, such as those affecting employment costs, have contributed to rising prices at the tills, while global instability and poor harvests have added further pressure.
The inflation spike has direct implications for the cost of travel. The RPI’s jump to 4.8% suggests that regulated train fares in England could rise by as much as 5.8% in 2026, if the government follows the same formula as this year—when fares were hiked by one percentage point above the RPI from July 2024. About 45% of train fares in Britain are regulated by the Westminster, Scottish, and Welsh governments, covering most commuter season tickets, some long-distance off-peak returns, and flexible tickets around major cities. Operators set unregulated fares, but these typically track regulated increases closely.
Pressure groups are already sounding the alarm. Railfuture recently warned, “It would be outrageous if fares even rose by as much as 5.5%.” The Department for Transport (DfT) has said it will provide an update on regulated fare changes later in 2025, but commuters are bracing themselves for another painful hike. A DfT spokesperson emphasized, “No decisions have been made on next year’s rail fares but our aim is that prices balance affordability for both passengers and taxpayers.”
The government is also moving forward with nationalizing train operators as their contracts expire, with the new public sector body Great British Railways (GBR) set to oversee rail infrastructure and operations. The Transport Secretary has made clear that restoring reliability to the railways is a top priority, promising that passengers will be at the heart of future plans.
Against this backdrop, Chancellor Rachel Reeves acknowledged the challenges facing UK households. “We have taken the decisions needed to stabilize the public finances, and we’re a long way from the double-digit inflation we saw under the previous government, but there’s more to do to ease the cost of living,” Reeves said. She outlined a series of government measures aimed at providing relief, including raising the minimum wage, extending the £3 bus fare cap, expanding free school meals to over half a million more children, and rolling out free breakfast clubs for every child in the country. “Through our plan for change we’re going further and faster to put more money in people’s pockets,” Reeves stated.
Despite these efforts, the Bank of England faces a tough balancing act. The central bank is tasked with keeping inflation at 2%, but with annual services CPI inflation rising to 5% in July from 4.7% in June, the challenge is formidable. Elliott Jordan-Doak, senior UK economist for Pantheon Macroeconomics, observed that policymakers might be concerned by the uptick in services inflation, though he suggested it was “partly driven by a sharp move in the erratic airfares component, which could unwind in August’s data.” Still, he cautioned, “The big picture remains that inflation is set to stay miles above target for the foreseeable future.”
Jordan-Doak forecasts that CPI will remain above 3% until April 2026, which could prompt the Bank of England to keep interest rates on hold for the rest of the year. With inflation running hot and relief still months away, British consumers and commuters alike are left to navigate a landscape where everyday essentials and travel are only getting pricier. The coming months may test the government’s ability to deliver on its pledges—and the public’s patience with rising costs.
