UK Inflation Slows to 3.6% as Energy and Hotel Costs Ease

UK inflation eased to 3.6% in the year to October, down from 3.8% in September, according to the latest figures from the Office for National Statistics (ONS).

Although still above the Bank of England’s 2% target, this is the slowest pace of price rises for four months and comes just before the Chancellor delivers the Autumn Budget.

What is Driving the Latest Change?

The ONS highlighted smaller increases in household energy bills as a key reason for the slowdown. Ofgem raised the energy price cap in October, but the 2% rise was far lower than the 9.6% increase applied this time last year. Hotel prices, which often fall between summer and winter, also dipped more sharply than they did last year.

However, not all categories moved in the right direction. Food inflation rose to 4.9%, from 4.5% in September. Prices increased for items such as bread, meat, fish, vegetables, chocolate and confectionery, although fruit prices fell slightly.

The Food and Drink Federation said the pressures were linked to ingredient and energy costs as well as regulatory requirements, such as packaging taxes and rising National Insurance.

Position Ahead of the Budget

Chancellor Rachel Reeves responded to the figures by saying that one of the main goals of the Budget is to ease cost-of-living pressures. What this will mean in terms of concrete measures we must wait to see.

Prospects for Interest Rates

Although inflation remains above target, the latest figures strengthen expectations of a cut to the Bank of England base rate. Some economists believe this could happen at the next meeting of the Monetary Policy Committee on 18 December 2025.

What This Means for Your Business

Reducing inflation is good news for the economy and increases confidence. You may find your customers becoming more willing to commit to spending again.

If you have clients who have paused projects, re-engaging with them could encourage them to restart work.

At the same time, cost pressures have not disappeared. The ONS reported that the annual cost of raw materials for businesses has continued to increase. So, keeping an eye on your costs and ways that you can control or reduce them is still key to remaining profitable.

If you would like to discuss how the latest inflation figures or the Autumn Budget may affect your business, please get in touch. We are here to help!