Why Prices Will Keep Rising in 2026 - And What It Means for Consumers

23rd January 2026

For many households, the hope going into 2026 is simple: that the worst of the cost-of-living crisis is finally over.

Inflation has fallen from its recent peaks, energy prices are no longer surging at the same pace, and wages have begun to catch up in some sectors.

Yet despite this easing, consumers should not expect prices to stand still. Instead, the reality is that prices are still set to rise in 2026, driven in large part by higher costs facing businesses.

At the headline level, most economic forecasts suggest UK inflation in 2026 will sit at around 2.5-3.5 per cent. That is lower than the highs of recent years, but it still means that the average basket of goods and services will cost noticeably more than it did in 2025. Inflation slowing does not mean prices fall — it simply means they rise more slowly.

Behind this headline figure lie persistent pressures on businesses that make further price rises hard to avoid.

One of the most significant is business rates. From April 2026, many firms — particularly in retail, hospitality and leisure — face higher bills following revaluation, even with transitional reliefs in place. For businesses operating on tight margins, these are not costs that can easily be absorbed. Instead, they are often passed on to customers through higher prices for food, drink, accommodation and everyday services.

Labour costs are another major factor. Increases in the National Living Wage and ongoing competition for staff mean wages remain a rising expense for many employers. This is especially true in labour-intensive sectors such as hospitality, care, retail and personal services. When wages rise faster than productivity, businesses typically respond by raising prices to protect their margins.

On top of this come input costs — the prices businesses pay for goods, materials and services. While some global pressures have eased, producer prices remain higher than before the pandemic. Manufacturers, wholesalers and suppliers continue to face higher financing costs, insurance, compliance and energy bills. These costs ripple through supply chains, eventually landing on the consumer.

The impact of these pressures will not be evenly spread. Food and groceries are likely to remain a key pressure point, as supermarkets warn that higher costs faced by suppliers and logistics firms limit how much can be absorbed internally. Eating out, hotels and leisure activities are also expected to see above-average price rises, reflecting the combined effect of wage growth and higher property-related costs. By contrast, some goods may see slower increases, but few areas of household spending are expected to see outright price falls.

For consumers, this means that 2026 will still feel like a year of rising prices, even if inflation is no longer dominating headlines. A 3 per cent increase may sound modest, but when combined with previous years of sharp rises, it compounds the strain on household budgets. Essentials continue to take up a larger share of income, leaving less room for discretionary spending.

In short, while the era of runaway inflation may be over, the cost pressures facing businesses have not disappeared. Higher business rates, rising wages and persistent operating costs mean that price increases for consumers in 2026 are not only likely — they are built into the system. The challenge for households will be adapting to a world where prices rise more slowly, but still rise all the same.