Inflation held at 2.8%: what SMEs should watch on transport, food and margins

UK inflation stayed steady in May, but small businesses should not read that as a sign that cost pressure has gone quiet.

The Office for National Statistics said the Consumer Prices Index rose by 2.8% in the 12 months to May 2026, unchanged from April. CPIH, the wider measure that includes owner occupiers’ housing costs, also held steady at 3.0%.

For SMEs, the important detail sits underneath the headline rate. Transport made the largest upward contribution to the monthly change in the annual inflation rate, while food and non-alcoholic beverages provided the largest offsetting downward contribution.

Transport costs are the pressure point

Transport prices rose by 6.8% in the 12 months to May, up from 4.5% in April, and the ONS said this was the highest transport inflation rate since December 2022. The upward pressure came from air fares, motor fuels, sea fares and a technical effect linked to Vehicle Excise Duty data.

That matters for a wide range of small firms. Trades, mobile service businesses, wholesalers, food producers, ecommerce sellers and local retailers can all feel higher transport costs through their own vehicles, courier charges, supplier delivery fees or staff travel.

The petrol detail is especially relevant for van-reliant firms. The ONS said average petrol prices rose by 0.6 pence per litre between April and May 2026, reaching 157.4 pence per litre. Overall motor fuel prices were 24.6% higher than a year earlier, the strongest annual rate since September 2022.

That does not mean every SME should change prices immediately. It does mean owners should check whether fuel, delivery and travel assumptions in quotes, service contracts and cash-flow forecasts are still realistic. Firms that price jobs weeks in advance can be exposed if mileage and supplier surcharges are treated as minor extras rather than live costs.

Food inflation eased, but hospitality still needs to watch the mix

There was better news in food and non-alcoholic beverages, where annual inflation slowed to 2.2% from 3.0% in April. The ONS said the May rate was the lowest since December 2024, with downward effects from meat, dairy, vegetables and fish partly offset by oils and fats.

For cafes, pubs, restaurants, food retailers and caterers, that easing is useful but uneven. A lower food inflation rate does not automatically mean the ingredients that dominate a particular menu or product line are cheaper. The practical step is to compare current supplier invoices against the items that actually drive margin, rather than relying on the headline food figure.

Hospitality and food-led firms may also want to revisit menu engineering, portion assumptions, wastage and supplier alternatives. A small fall in one ingredient category can be cancelled out quickly if delivery charges, energy use or wage costs are rising elsewhere.

Services inflation is still sticky

The headline CPI rate was unchanged, but core CPI rose to 2.6% from 2.5%. CPI services inflation also rose to 3.7% from 3.2%.

That is worth watching because many small businesses buy services as well as goods: accountancy, software, insurance, repairs, logistics, marketing, outsourced HR and professional support. If services inflation remains firm, SMEs may continue to see renewal quotes and retainer costs move faster than goods prices.

Businesses planning summer or autumn budgets should therefore separate costs into categories rather than applying one general inflation assumption. Fuel and logistics, food inputs, professional services, rent-related costs and borrowing costs can move in different directions at the same time.

What small firms should check now

First, review any quotes or contracts that include travel, delivery or timed transport. Where possible, make fuel and mileage assumptions explicit so the business is not absorbing every increase silently.

Second, check whether supplier price changes match the categories that are actually easing. Food-related SMEs should look line by line at the goods they use most, especially if recent price rises were justified by broad inflation pressure.

Third, update cash-flow forecasts with separate assumptions for transport, stock, services and energy. A flat headline inflation rate can hide sharp movement in the costs that matter most to an individual firm.

Finally, keep an eye on the Bank of England and lender pricing. Inflation remains above the 2% target, and small firms considering finance, refinancing or asset purchases should avoid assuming borrowing conditions will improve quickly.

For SMEs, the message from May’s figures is not that inflation has disappeared. It is that the squeeze has become more specific. Firms that know exactly where transport, supplier and service costs hit their margin will be better placed than those waiting for the headline rate to tell the whole story.