Underscoring the challenge for Andy Burnham\u2019s government to give \u201cbreathing space\u201d to hard-pressed households, the acceleration in price rises comes after consumers in Great Britain faced the sharpest summer increase in energy bills in four years in July after the US-Israel war on Iran<\/a> sent shock waves through global energy markets.<\/p>\n The 13% increase in the cap on energy bills at the start of July<\/a> led to a rise in gas and electricity bills.<\/p>\n The ONS said consumers faced other pressures alongside the biggest jump in gas prices since Russia\u2019s invasion of Ukraine in 2022, including furniture prices falling by less than usual for this time of year, and a smaller fall in clothing prices because of reduced discounting.<\/p>\n However, the prices of raw materials and goods leaving factories slowed, driven by a drop in crude oil and refined petroleum prices in July.<\/p>\n Graph showing UK inflation rate from before 2017 to July 2026<\/a><\/p>\n Against a volatile backdrop in the Middle East, the Bank of England<\/a> is considering whether to raise interest rates from as early as next month in response to fears over stubbornly high inflation becoming entrenched in the economy.<\/p>\n It comes as the chancellor, John Healey<\/a>, prepares for a tough October budget as rising inflation and higher borrowing costs complicate the task of funding Burnham\u2019s policy priorities.<\/p>\n Burnham used his first week as prime minister to announce a series of \u201cbreathing space\u201d measures to ease the cost of living, including cutting VAT<\/a> to reduce consumer electricity bills by an average of \u00a345 a year from October.<\/p>\n Healey said the UK economy was resilient despite \u201cIran war inflation\u201d driving up prices for British households. \u201cThere is more to do to restore hope and build a stronger economy where prosperity is shared more fairly across Britain.\u201d<\/p>\n Official figures show Britain\u2019s economy overcame gloomy forecasts to grow at the fastest rate in the G7 in the first half of this year. Inflation<\/a> had also shown signs of cooling from a peak of 3.8% last year. The headline rate had been on track to fall close to 2% before the outbreak of the Iran war in late February.<\/p>\n Economists said the Bank could \u201clook through\u201d the latest energy price shock as a cooling jobs market limited the risk of inflation sticking at higher levels. Separate figures on Tuesday showed wage growth in the UK slowed in June<\/a> and vacancies hit a five-year low.<\/p>\n skip past newsletter promotion<\/a>Free newsletter | Every weekday<\/p>\n Sign up to Business Today<\/p>\n Get set for the working day \u2013 we’ll point you to all the business news and analysis you need every morning<\/p>\n after newsletter promotion<\/p>\n Ruth Gregory, the deputy chief UK economist at the consultancy Capital Economics, said: \u201cAs the latest rebound in energy prices doesn\u2019t go much further, we still think the weak labour market will prevent second-round effects<\/a>, meaning inflation falls to 2% next year.\u201d<\/p>\n However, concerns are mounting as the fighting in the Middle East and extreme weather hitting food production worldwide rekindle fears of a sharp inflation increase around the globe.<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/06\/500.jpg\")
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