UK inflation fell to its lowest level in more than a year last month, but small business owners should read the number for what it is: a snapshot of a June that has already been overtaken by events.

Figures published by the Office for National Statistics on Wednesday showed inflation cooled to 2.6 per cent on an annual basis in June, down from 2.8 per cent the previous month. City economists had forecast 2.7 per cent. It was the lowest reading since March 2025.

The driver was fuel. Diesel fell by 10.7p to 176.4p per litre between May and June, and petrol dropped 2.1p to 155.3p, after the United States and Iran signed a memorandum of understanding to stop fighting for 60 days and global oil prices slid.

For any firm running vans, plant or a delivery fleet, that was a genuine reprieve. It may also prove a short one. Fighting resumed in July and oil has jumped by around a fifth in the past month, which is likely to push inflation back up in the second half of the year.

Grant Fitzner, chief economist at the ONS, said: “A fall in motor fuel prices, particularly diesel, helped ease inflation in June.”

“Food prices fell this month, driven by products including chocolate, margarine and beef. Clothing prices also fell with the start of summer sales, with bigger discounts than last year.”

Grocery price growth slowed to 1.7 per cent over the year to June, from 2.2 per cent, the lowest annual food inflation rate since August 2024. Hospitality operators and food retailers working on thin margins will take that where they can get it.

The more telling figure for business owners sits further down the release. Services inflation, the measure the Bank of England watches most closely for domestically generated price pressure, inched down only to 3.6 per cent from 3.7 per cent. Core inflation, stripping out food and energy, was flat at 2.6 per cent.

In other words, the fall was imported and the sticky domestic bit has barely moved. That is why the Bank’s monetary policy committee, which meets next Thursday, is expected to leave Bank Rate unchanged at 3.75 per cent. Governor Andrew Bailey has already indicated that cuts are off the table for now, so any SME that has pencilled cheaper borrowing into its second-half cash-flow forecast should sharpen the pencil.

The data lands well for Andy Burnham in his first week as prime minister, following public borrowing figures of £16 billion in June that came in nearly £5 billion below the same month last year. Unemployment was stable at 4.9 per cent in the three months to May.

John Healey, the chancellor, said: “Falling inflation is news families want to hear but there is much more to do to give people the breathing space they need.

“That is why yesterday we cut VAT on electricity bills and today we’re announcing a £2 cap on bus fares from January. We have chosen to focus on the cost of living in our first week, signalling that concern for working people will be at the heart of everything we do.”

The two measures, VAT removed from electricity bills from October and most single bus fares in England capped at £2, are aimed squarely at households. Business owners should check the small print before budgeting for relief: the VAT cut applies to domestic electricity supplies, not commercial ones, and VAT-registered firms reclaim the tax on energy in any case.

The read-across for SMEs is modest but real. Cheaper household energy and transport support consumer spending, and flat unemployment suggests demand is holding. What has not changed is the cost of money, the cost of employing people, or the direction of oil. June was the good month. Plan for the rest of the year on that basis.