Regulated train fares in England could rise over 4% next year
Regulated train fares in England could increase by more than 4% next year.
The Office for National Statistics announced that inflation measured by the retail prices index (RPI) rose to 3.2% in July.
The government has not confirmed what it will do about fare increases in 2027, but last year’s 4.6% cap was one percentage point above RPI in July 2024.
If that formula is used to set next year’s increase, the cost of train travel will jump by 4.2%. That would mean an annual season ticket from Brighton to London rising by £219 to £5,423, according to PA.
A flexi ticket for travel two days per week over a year from Leeds to Manchester would increase by £151.35 to £3,754.95.
Keir Starmer’s government froze regulated fares this year.
About 45% of fares on Britain’s railways are regulated by the Westminster, Scottish and Welsh governments. They include season tickets on most commuter journeys, some off-peak return tickets on long-distance routes, and flexible tickets for travel around major cities.
Unregulated fares are set by operators, but increases are expected to be similar.
UK food prices rise at lowest rate since September 2021
Food and non-alcoholic drink prices rose at an annual rate of 1.3% in July, down from 1.7% in June – the lowest rate since September 2021.
The price of meat, particularly beef and breaded chicken, fell this year but rose last year.
Prices of vegetables fell more last month than they did last July, and prices of sugar, jam and honey rose less in July than they did last year.
Prices of fish rose but fell last year, while bread and cereals also became more expensive and were little changed a year ago.
Remarkably benign UK food prices keep a lid on inflation, said ING economist James Smith.
Headline inflation is up three-tenths of a percentage point to 2.9%, on the well-telegraphed rise in household energy bills and also a bigger rise in social rents than this time last year. That wasoffset by July’s short-lived dip in petrol and diesel prices (spoiler alert: that won’t last into August’s figures).
None of that was unexpected. What remains much more surprising, however, is just how benign food inflation is right now. Prices here were flat on the month, having fallen in month-on-month terms in the two prior readings, something that is highly unusual.
A quick glance at producer prices suggests consumer food inflation could theoretically even go negative in annual terms over the next few months. We’re not convinced that will happen – and it was always going to take at least a year for the full effects of the Iran War to show up here.
But it should still be welcome news for the Bank of England’s hawks, who point to the influential role of food prices in setting household inflation expectations.
Britain’s new prime minister Andy Burnham has pledged to ease cost of living pressures, and has already announced measures including a tax cut on household electricity prices and a cap on bus fares.
John Healey said in response to the latest inflation figures:
Iran war inflation continues to impact prices here at home, but Britain’s economy is resilient.
We have cut VAT on electricity bills and capped bus fares at £2 – to give breathing space to those feeling the strain.
There is more to do to restore hope and build a stronger economy where prosperity is shared more fairly across Britain.
Analysts expect inflation to rise further towards the end of the year as higher energy costs feed through to people’s bills, with no signs of progress on a deal to end the Middle East war. The US-Iran ceasefire expired on Monday.
The Bank of England held its benchmark interest rate at 3.75% last month even though inflation was above its 2% target.
Jonathan Raymond, investment manager at Quilter Cheviot, said:
A renewed spike in inflation has been expected as the war in the Middle East continues to navigate a clunky ceasefire.
Things remain far from normal in the Strait of Hormuz and look unlikely to be resolved any time soon, meaning pressure is likely to remain on prices for the remainder of the year at least.
July clothing prices affected by early discounting during June heatwave
Prices of furniture and household goods rose 1% year on year in July, compared with an annual fall of 0.2% in June, the UK’s statistics office said.
Prices of furniture and furnishings fell in July compared with June, but by less than a year ago. There were smaller upward contributions to infllation from tools and equipment for house and garden, and goods and services for routine household maintenance.
Clothing and footwear prices rose by 0.5% in July, compared with a fall of 0.5% the previous month. On a monthly basis, prices fell by 0.9% last month, the smallest July price drop since 2020.
The Office for National Statistics explained that discounting on clothing started earlier than usual this year and that the quantity bought in clothing stores rose by 1.9%, the largest monthly rise since September 2025. People scrambled to buy summer clothes during the June heatwave, and retailers lured customers with sales promotions.
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JP Morgan warns rebound in UK inflation is 'warning shot for what could come next'
The UK’s core rate of inflation, which strips out volatile items such as energy, food and alcohol, stayed at 2.6% in July, while economists had expected it to dip to 2.5%.
Scott Gardner, investment strategist at J.P. Morgan Personal Investing, described the rebound in headline inflation as a “warning shot for what could come next”. He explained:
UK headline inflation jumped in July as the Ofgem energy price cap rise hit household bills. The increase was expected but marks a clear reversal from previous months when the headline rate was falling.
Until now, the spike in global energy prices had been felt the most among motorists when filling up their vehicles at the petrol pump. July data shows that the inflationary impact of the US-Iran war is spreading as rising energy costs feed through into higher household bills.
As the situation in the Middle East remains uncertain, the continuation of elevated energy costs remains the largest challenge for consumers and businesses. Petrol prices have already risen 6.3% in August compared to the previous month and will show up in next month’s reading. Businesses are also facing higher input prices which are being passed on to buyers and could rise heading into the colder months later this year. Falls in services inflation and shop prices are helping to offset some of these pressures for now but the jury is out on whether this will last.
While one data reading doesn’t always tell the whole story, this rebound in UK inflation is a warning shot for what could come next. We are keeping an eye out to see whether higher global energy prices have a knock-on effect for consumer goods prices, electronics and the wider artificial intelligence build out. This would have an impact on the UK economy and present a challenge for the Bank of England who are keen to avoid hiking rates. If goods inflation accelerates, then it will become difficult for BOE policymakers to maintain rates at the current level.
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Introduction: UK inflation increases in July, driven by pricier gas; oil prices rise again
Good morning, and welcome to our rolling coverage of the global economy, the financial markets, the eurozone and business.
It’s UK inflation day!
Inflation picked up to 2.9% last month, mainly driven by higher gas prices.
The annual increase in the consumer prices index in July compares with a rate of 2.6% in June, according to the Office for National Statistics. City economists had forecast a rate of 2.9%.
Housing and household services, and furniture drove up the inflation rate while transport made the largest, partially offsetting, downward contribution, the statistics office said.
Within housing, higher gas prices were the main factor: Prices rose by 14.7% in July compared with a fall of 7.2% a year ago. Britain’s energy regulator changed the energy price cap, leading to higher standard variable tariffs, and estimated that for an average household paying by direct debit for dual fuel, this equated to an annual bill of £1,862, a rise of £221.
The increase was the largest rise in gas prices since October 2022, when UK consumers were first exposed to the higher prices arising from the energy crisis relating to Russia’s war in Ukraine. The price rise means that gas prices are at their highest level since March 2024.
The news comes after British consumers faced the sharpest summer increase in energy charges in four years in July as the US-Israel war on Iran sent shock waves through global energy markets.
However, separate official figures on Tuesday showing a slowdown in the jobs market – including a slowdown in private sector pay growth – may mean that the Bank of England won’t need to hike interest rates, according to economists.
Crude oil prices have risen this week as a ceasefire between the US and Iran expired on Monday, with Brent crude up 0.65% to $91.61 a barrel this morning.
In Asian stock markets, Japan’s Nikkei has slumped again, by 3%, following a chip sell-off on Wall Street. South Korea’s Kospi plunged 5.9% and China’s Shenzhen exchange lost 4.7%.
The Agenda
9.30am BST: UK Private rents and house prices for July
8.10am BST: European Central Bank president Christine Lagarde speaks
10am BST: Eurozone inflation final for July
7pm BST: US Federal Reserve minutes of last meeting
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