The uk's headline inflation moderated in January 2026 as cheaper air travel and weaker motor fuel and some grocery price rises reduced upward pressure, while leisure and accommodation costs accelerated
UK inflation slowed at the start of 2026, giving households and businesses a modest sigh of relief — but the picture is mixed.
Headline numbers
– The Office for National Statistics says the Consumer Prices Index (CPI) rose 3.0% in the year to January 2026, down from 3.4% in December.
CPIH, which also counts owner-occupiers’ housing costs, eased to 3.2% from 3.6%.
– That drop is welcome, yet inflation remains higher than before the pandemic and still uneven across the economy.
What the data is telling us
– The easing in headline inflation isn’t a uniform fall in prices.
Instead, some categories slipped sharply while others continued to climb. That patchwork makes life harder for policymakers, corporate planners and households trying to budget.
– For businesses focused on sustainability, these shifts matter because they change the calculus for investing in decarbonisation and resilience.
When certain input costs rise, projects that cut long-term operating expenses become more attractive.
Which sectors drove the change
Transport and food accounted for much of the slowdown, but the story differs beneath the surface.
Transport: big seasonal swings
– Air fares plunged from roughly an 11.0% annual rise in December 2025 to about 0.6% in January 2026 — a pronounced seasonal reversal as holiday demand subsided. – Petrol fell around 2.8% year on year and diesel about 1.1%; on a monthly basis, petrol was down roughly 3.1 pence per litre. Those moves helped bring transport inflation from 4.0% to 2.7%.
– For households and firms that buy fuel or sell travel, lower volatility eases short-term pressure. For companies, it also highlights practical levers: fleet optimisation, modal shifts and smarter fuel procurement can cut emissions and reduce exposure to oil-price swings.
– Policymakers and businesses will watch whether these are temporary seasonal effects or the start of a more lasting decline.
Food, household goods and electricals: mixed progress
– Food and non-alcoholic beverages slowed from 4.5% to 3.6% year on year. Categories like butter (annual inflation down from ~8.9% to ~1.4%) and coffee (from ~13.7% to ~6.2%) saw notable moderation. Staples such as crisps, meat, chocolate, eggs and tea also eased.
– Prices for large household appliances — fridges, freezers, cookers, washing machines and dryers — were generally lower than a year earlier, which weighed on goods inflation.
– However, some items bucked the trend: margarine, whole milk, pasta, soft drinks and fruit rose faster in January than in December. Electricity also climbed to about 5.3% after changes to the energy price cap, lifting parts of the housing and household services component.
– Lower prices for energy-efficient appliances can accelerate replacement cycles and reduce household energy use, creating a customer-facing route to emissions reductions.
Services and hospitality: leisure spending pushes up prices
– Leisure and culture costs climbed sharply. Ticket prices for cinemas, theatres and concerts rose by about 10.2% year on year (from 3.7% in December). Entry fees for museums and zoos jumped to roughly 7.1%. Accommodation moved from a small fall to a slight annual increase.
– Demand for leisure appears robust, keeping upward pressure on services. Businesses in this space can protect margins through dynamic pricing, capacity adjustments and by highlighting sustainability credentials to customers who value them.
What this means for households and firms
– Households that spend more on leisure and services will feel inflation more keenly than those who focus spending on goods and transport. The headline easing to 3.0% (CPI) and 3.2% (CPIH) therefore masks quite different experiences across households.
– For companies, the message is twofold: protect short-term margins while continuing to invest where it makes financial sense — energy efficiency, circular design and supplier renegotiation can reduce exposure to volatile inputs and cut long-term costs.
– Practical steps to consider: stress-test budgets against sticky core inflation scenarios, accelerate energy-efficiency and circular initiatives, tighten procurement practices (especially for fuel and food), and clarify scope 1–2–3 emissions accounting so sustainability investments are measurable and fundable.
Where attention should focus next
– Policymakers will use incoming monthly data to judge whether the easing persists or if stubborn service-price growth keeps underlying inflation elevated. Central banks need to distinguish seasonal movements in transport and energy from lasting trends before changing policy settings.
– Businesses and investors should scenario-plan for both outcomes and use any temporary relief to shore up balance sheets and boost resilience. Yet energy, select groceries and many services remain sources of upward pressure. The current mix underscores that tackling inflation — and building corporate resilience — means both managing immediate cost risks and accelerating investments that lower operating costs and emissions over the longer term.
