The ONS reports that the CPI increased by 3.3% in the 12 months to March and this is a rise from the 3% in February. The CPIH measure, which includes owner occupiers’ housing costs, reached 3.4% over that time frame. On a monthly basis, CPI increased by 0.7% in March, above the 0.3% recorded a year earlier.
Transport made the biggest difference to the latest reading as the ONS reported that prices in the transport division went up by 4.7% in the year to March and it was 2.4% in February. Petrol went up by 8.6 pence per litre between February and March, taking the average price to 140.2 pence per litre. And then, diesel increased by 17.6 pence per litre to 158.7 pence per litre, which would make this the highest level since November of 2023.
Prices in housing increased by 4.3% over the year. Domestic heating oil prices went up by 90.5% in March, whereas they fell by 7.5% a year earlier. The ONS said this resulted in a 12 month rate of 95.3%, again, the highest, but since September of 2022.
Food and non alcoholic beverages increased by 3.7% in the year to March. Clothing and footwear fell by 0.8% over the same period, which offset some of the upward movement elsewhere.
How Will This Affect UK Businesses?
Higher fuel costs will obviously impact and change operating budgets. Delivery fleets, service engineers and logistics providers now pay more for petrol than they did earlier in the year. Even air fares increased by 10.0% between February and March, according to the ONS, which affects corporate travel budgets.
On energy bills, ING said a July update to the Ofgem price cap is likely to take inflation “towards 3.5-4%, depending on where wholesale natural gas prices go next”. ING added that its forecasts are “consistent with a 25% rise in household electricity/gas bills when the Ofgem price cap is next updated in July”.
If wholesale prices stay near current levels, ING said the July cap is “more likely to rise by a mere 10-15% and retrace much of that increase in October”. Even a 10-15% increase adds to overheads for shops, pubs and manufacturers across the country.
Services inflation reached 4.5% under the CPI measure. That covers areas such as restaurants and hotels, which recorded annual inflation of 4.0%. Businesses in these sectors face higher wage, energy and supply costs and may adjust their pricing in response.
So, What Does This Mean For Consumers?
When business costs increase, prices on the high street often follow. Transport inflation at 4.7% filters into delivery charges and ticket prices across the country. Restaurant and hotel prices increasing by 4.0% make meals and short breaks more expensive for customers.
Food inflation at 3.7% means supermarket bills are gradually getting higher again. The ONS also reported upward effects from chocolate and confectionery, meat, fish and soft drinks.
Energy costs are the biggest areas that impact many families’ survival. ING said it expects inflation to peak “fractionally above 4% in August/September” under its base case. It added, “So long as inflation doesn’t spike materially above 4% – a level above which the Bank has identified as being more likely to trigger a persistent bout of price pressure – we think the BoE will prefer to keep rates on hold this year.”
Borrowing costs may therefore stay unchanged in the near term. Even so, fuel, food and energy bills take a bigger share of monthly income, and businesses facing higher costs are likely to pass on at least some of that to customers.
So What Do Experts Say?
Vladyslav Marchenko, CEO and Founder, Shopify Playbook, says, “I work with e-commerce providers on Shopify, and inflation isn’t hitting them where everyone says it is. It’s not in product prices – they’ve learned to raise them. It’s hitting advertising costs and shipping.
“Meta-CPM has grown by 15-20% year-over-year. This means that if break-even ROAS was 2.0, now it needs to be 2.3 to avoid crushing margins. Most merchants don’t notice this until the end of the quarter.
“Second, carriers. USPS raised their December rates, UPS and FedEx raised their January rates. The average merchant loses $0.50-1.00 on each order, often without adjusting their free-shipping threshold. If your AOV is $60 and free shipping is $50, shipping inflation has eaten away at you until you raise the threshold to $65.
“On the consumer side, price sensitivity is increasing, but not symmetrically. According to our calculator data, customers tolerate a 5-7% increase in product prices, but a $3 increase in shipping costs is a trigger for cart abandonment. 63% of cart abandonments are due to shipping surprises (Baymard data)—the number itself hasn’t changed, but its importance increases during inflationary periods.
“My advice to merchants: recalculate break-even ROAS and the free shipping threshold every three months. This takes 30 minutes. Those who don’t do this quietly lose margin for the rest of the quarter.”
Rich Pleeth, CEO and Co-Founder at Finmile says, “A 3.3% inflation rise might sound modest on paper, but for UK businesses, especially in logistics and delivery, it compounds quickly and hits margins in very real ways. Labour, fuel, vehicle maintenance, and financing costs are all still elevated.
“The issue is that delivery pricing, particularly in e-commerce, has not risen in line with those costs. In fact, in many cases it has gone the other way due to intense competition and price pressure. That creates a structural squeeze where operators are being asked to do more for less.
“The businesses that will win in this environment are not the ones negotiating slightly better rates, but the ones fundamentally changing how they operate. This means using AI to dynamically optimise routes, reduce wasted miles, improve first time delivery success, and remove operational inefficiencies in real time.
“Inflation is not just a cost problem. It is exposing which business models are fragile and which are built to adapt.”
Paul Gillooly, the Financial Advisor and Director of Dot Dot Loans, says, “An increase in inflation of 3.3% will bring increased hardship to both UK consumers and businesses, particularly where businesses operate with low profit margins.
“For consumers, increased inflation results in food, transport and household bills continuing to increase. Increased costs means that consumers are less able to absorb unexpected financial shocks, service financial debt, or save. From my perspective in the subprime lending business, inflation in the economic cycle profits poor credit the most, due to already higher levels of financial stress with less financial alternatives available to them.
“For businesses, and especially small and medium-sized businesses, inflation means increased costs on wages, energy, and costs of goods and services. Business owners, in many circumstances, are forced to decide between less profits or passing on increased costs to their customers. Greater costs and reduced consumption will cause less cash flow to the business.
“In the current economic situation, consumers and businesses will curtail their financial consumption. Consumers will only spend on what is absolutely necessary, and businesses will only invest in what is necessary. Financial transactions will only take place when the economic situation is more stable.
“When it comes to dealing with limited budgets, a 3.3% inflation rise looks less than appealing and bad for spending, borrowing and most financial rationality.”
