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UK Inflation Rises to 3.5% as Fuel Prices Surge Before Budget

Petrol and diesel drove the quickest rise since October 2025, as government borrowing reached nearly £25bn in September

By AXY Business Desk ·

UK Inflation Rises to 3.5% as Fuel Prices Surge Before Budget

Key points

UK inflation picked up to 3.5% in the year to September, up from 3.1%, according to the Office for National Statistics (ONS). It is the quickest pace since October 2025. The jump landed one week before Chancellor John Healey delivers his first Budget, and the biggest push came from the cost of filling up a car.

For households, the number is easy to feel. Inflation measures how fast the prices of everyday goods and services are rising. At 3.5%, a basket of things that cost £100 a year ago now costs about £103.50. Wages and benefits have to keep pace just to stand still, and any extra cost at the pump comes straight out of the household budget.

What the latest figures show

The ONS said the average price of petrol rose by 8.2p per litre between August and September, reaching 169.5p per litre. That is the highest level for petrol since August 2022. Diesel also rocketed, rising to 192.5p per litre. Across all motor fuels, prices rose by 29.8% in the period covered by the figures.

Grant Fitzner, the ONS chief economist, said September’s “notable” increase meant inflation was at its highest rate in almost a year. His comment points to a turn in the data rather than a small wobble. A single month of higher fuel prices can move the headline rate quickly, especially when the increase is as large as this one.

Fuel was not the only driver. Fitzner said rising prices for airfares, computer games and live events also pushed the figure up. Those categories are more discretionary. Families can cut back on a holiday or a concert ticket, but they still have to buy fuel to get to work, collect children or make deliveries, which is why the fuel increase carries so much weight in the overall picture.

Why fuel prices have jumped

The pressure on fuel comes from conflicts far from the UK. According to the ONS source material, the wars in the Middle East and Ukraine have pushed fuel prices up. Iran’s effective closure of the Strait of Hormuz, after US and Israeli attacks, has severely disrupted one of the world’s most important shipping routes for crude oil. The Strait is a narrow passage of water between Iran and Oman, and a large share of the world’s seaborne oil moves through it. When that flow is cut or restricted, the market tightens quickly and prices rise.

The supply problem is not limited to crude oil. Refineries turn crude into the petrol and diesel that drives cars, vans and lorries. The source says oil refining capacity has been hampered globally by Russian and Ukrainian attacks on each other’s infrastructure. If refineries cannot run at full capacity, there is less finished fuel to go around, even when crude is available.

These global shocks reach UK drivers through wholesale markets and then through retail pump prices, usually with some delay. That means the September figures may only be part of the story. Analysts expect fuel prices to remain a key factor in future inflation readings for as long as the supply disruptions last, though the size and timing of any further rise depend on events the UK cannot control.

The Budget and government borrowing

The inflation figures arrived alongside another piece of unwelcome news for the Treasury. UK government borrowing jumped to nearly £25bn in September, according to the ONS figures reported by the BBC. Public borrowing is the gap between what the government spends and what it collects in taxes and other income in a given period. A bigger gap means more borrowing, and more borrowing adds to the national debt that the government must pay interest on.

Higher inflation complicates that picture. When prices rise faster, the government’s own costs can go up, and the Chancellor has less room to meet spending demands without raising taxes or borrowing more. Healey now has about a week before he sets out his plans. The Budget is the government’s main fiscal event, where the Chancellor announces tax and spending decisions for the year ahead.

Healey pointed to outside praise as he prepares. He said the International Monetary Fund (IMF), the global lender that monitors national economies, had last week praised the UK government for its “fiscal discipline”. Fiscal discipline generally means keeping public spending and borrowing under control. Healey can use that praise to argue that the government is managing its finances carefully, even as external shocks push prices up.

He also pointed to a domestic energy decision. The government has just given the go-ahead for getting more gas from the North Sea’s Jackdaw field, according to the source material. Gas and oil from UK waters are not a quick fix for global prices, because production takes time to ramp up and prices are set on international markets. Still, the decision shows the government is trying to increase domestic energy supply at a time when imported fuel has become more expensive.

Reaction and what it means for households

Healey said: “We know that price rises from conflicts in the Middle East and Europe are hitting Britain and countries worldwide.” His message puts the blame for rising prices on events abroad. That framing matters for the Budget debate, because opposition parties and households will want to know what the government plans to do about the cost of living in the months ahead.

For drivers, the immediate effect is a higher bill at the pump. A rise of 8.2p a litre on petrol adds real money to a regular fill-up, and the higher diesel price affects anyone who drives a van for work or relies on road transport for goods. For travellers, higher airfares add to the cost of holidays and visits to family. For people who go to concerts, football or other live events, the rise in event prices means the same night out now costs more.

The cost pressures also affect the Bank of England, the UK’s central bank. The Bank aims to keep inflation at 2%, and a reading of 3.5% is well above that goal. Higher inflation can make it harder for the Bank to cut interest rates, which affects mortgages, loans and savings. Analysts will watch how the Bank responds, since the central bank looks at inflation in the context of the wider economy, not just one month’s data.

What to watch next

The Budget is the first key test. Healey will need to show how the government plans to handle higher borrowing and rising prices at the same time. Markets and economists will look closely at whether he changes spending plans, tax policy or support for households and businesses hit by fuel costs.

The next inflation releases will show whether the September jump is a one-off or the start of a longer run. Much depends on whether the Strait of Hormuz remains disrupted and whether refinery attacks in Russia and Ukraine continue. Any easing of those supply problems would ease pressure at the pump. A worsening of them could push prices higher again.

For now, the immediate picture is clear. UK inflation has risen to 3.5%, fuel prices have jumped sharply, and government borrowing has increased. Households will feel the effects first at the petrol station and in the cost of travel and entertainment, while the Chancellor faces the harder task of balancing the public finances in a week’s time.

Questions and answers

Why did UK inflation rise to 3.5%?

The Office for National Statistics said inflation rose to 3.5% in the year to September from 3.1%. The main driver was sharp increases in petrol and diesel prices, with airfares, computer games and live events also pushing the figure up.

How much did petrol and diesel prices rise?

The average price of petrol rose by 8.2p per litre between August and September, reaching 169.5p per litre. Diesel rose to 192.5p per litre, and motor fuel prices overall rose by 29.8% in the period covered by the figures.

Why are fuel prices rising in the UK?

The source material says conflicts in the Middle East and Europe are squeezing global oil supplies. Iran’s effective closure of the Strait of Hormuz after US and Israeli attacks has disrupted crude oil shipments, and Russian and Ukrainian attacks have hampered oil refining capacity.

When is the UK Budget and what does it mean for borrowing?

Chancellor John Healey delivers his first Budget in about a week. UK government borrowing jumped to nearly £25bn in September, which adds pressure on the Chancellor as he sets tax and spending plans.

Topics: UK inflation, Office for National Statistics, petrol prices, John Healey, UK Budget, Strait of Hormuz, government borrowing

Sources: BBC Business RSS

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