Inflation stays at 3% – industry reaction

UK inflation remained at 3% in February, according to the latest data from the Office for National Statistics (ONS).

On a monthly basis, CPI rose by 0.4% in February 2026, the same rate as in February 2025. Clothing made the largest upward contribution to the monthly change to CPI annual rates; motor fuels made the largest, offsetting downward contribution.

Core CPI (CPI excluding energy, food, alcohol and tobacco) rose by 3.2% in the 12 months to February 2026, up from 3.1% in the 12 months to January; the CPI goods annual rate was unchanged at 1.6%, while the CPI services annual rate eased slightly from 4.4% to 4.3%.

Commenting on inflation figures for February, ONS Chief Economist Grant Fitzner said “February’s inflation figures have, for the first time, included supermarket scanner data, replacing many of our physically collected prices, marking a significant improvement in our measurement and understanding of changing prices.

“After last month’s slowdown, annual inflation was unchanged in February as various price movements offset each other. The largest upward driver was the price of clothing, which rose this month but fell a year ago. This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.

“A fall in the cost of alcoholic drinks due to promotional activity, compared with a rise last year, was also a downward driver, while little change in food prices, again compared with a small rise this time last year, added further downward pressure.”

Neil Rudge, Chief Banking Officer for Commercial at Shawbrook, said “The latest ONS figures indicate that inflation has held steady at 3%, suggesting the UK’s downward trajectory may be starting to level off and that the path back to the Bank of England’s 2% target is unlikely to be smooth. This reading also does not yet fully reflect the impact of recent geopolitical developments, particularly on energy and input costs, meaning many businesses are likely to be cautious about what lies ahead.

“For SMEs, this wider uncertainty, alongside persistent cost pressures, particularly across supply chains and distribution, is squeezing margins, complicating planning and making it harder to forecast with confidence. While these challenges cannot always be anticipated, they reinforce the importance of staying flexible, with businesses that keep a close eye on cash flow and remain adaptable in their plans better placed to navigate the months ahead and seek external support where needed to fund any shift in strategy.”

Suren Thiru, ICAEW Chief Economist, said “February’s unchanged inflation is a false flag for the economy as these figures pre-date the eyewatering energy shock induced by the Middle East conflict and the subsequent financial pain facing consumers and businesses.

“Though elevated services and core inflation means the UK is more vulnerable to the inflationary fallout from the Iran war, as it confirms that underlying price pressures were already stubborn entering this crisis, the squeeze from higher unemployment should limit any second-round effects.

“While inflation should fall next month as the cut to green levies temporarily lowers energy bills, a brutal inflation surge looms with skyrocketing oil and gas costs likely to lift the headline rate above 4% by the summer.

“Though the hawkish tilt to last week’s policy decision means another interest rate cut this year currently looks impossible, the likelihood of rate rises has been dramatically overstated as the damage to growth from the conflict will likely lower inflation over time.”

Karl Leitelmayer, Sales Director – Tax at Premium Credit, said: “VAT is one of the most immediate pressures on cash flow. A single large payment every quarter can unsettle even the most well-run businesses. Structuring those payments differently can help smooth the cycle and protect liquidity.”

John Phillips, CEO of Just Mortgages and Spicerhaart, said “Inflation holding firm in February is quite literally the calm before the storm as we anticipate and brace for a spike in inflation in the coming months. In truth, many are already overlooking today’s data in preparation of what is to come as the disruption caused by the conflict filters through to the UK economy. We’ve seen already a nailed-on cut turn into a hold and the promise of future cuts turn into the very real threat of rate increases. Even if the conflict stopped tomorrow, ‘Trumpflation’ is likely to linger on.

“We simply cannot put our heads in the sand and wait for it all to blow over. As we’ve seen in our latest figures for buyer registrations, valuation requests and mortgage appointments, clients still want and need support. While we are seeing thousands of products being pulled from shelves, either to be repriced or not to return, there are plenty of options still out there. As is often the case in uncertainty, the best course of action is to act early with quality advice and be prepared. Brokers play a crucial role in helping clients navigate a rapidly changing market, identify the best deals available and make informed decisions – particularly where opportunities exist to secure a better rate. Now more than ever, we need to keep reminding clients of this.”