UK inflation stood at 3.8 per cent in the year to August, and is expected to rise when the September figure is released next month.
Rising food prices were the biggest contributor – increasing by 5.1 per cent annually. Beef, butter, milk and chocolate prices have surged, with the cost of living still affecting millions of households.
The i Paper speaks to experts to try and understand why the UK’s figure is so high, and whether it could get worse in the future.
How does UK inflation compare internationally?
For comparison, in the Euro area, inflation stands at 2.1 per cent, and in the US, it is 2.9 per cent.
However, several other countries are seeing much higher figures. including Turkey and Argentina.
Last year at the Autumn Budget, Chancellor Rachel Reeves introduced a series of tax rises and policies that economists argue have pushed up prices.
James Smith, research director of the Resolution Foundation, said: “There are many drivers of Britain’s high inflation, some of which lies at the Government’s door. The employer NI rise in April pushed up business costs – especially in low-paying sectors like retail and hospitality – which has in turn driven up prices.”
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Read MoreRaj Badiani, economics director at S&P Global Market Intelligence, added: “The rise in the minimum wage and employer national insurance contributions from April 2025 has created significant challenges for labour-intensive services.
Food inflation is also rising, and economists believe this is partly down to Labour policies. It currently stands at 5.1 per cent, up from 4.9 per cent in July.
“Higher labour costs for major food retailers have contributed to accelerating food price inflation during the summer months,” says Badiani.
A price cap set by energy regulator Ofgem sits at £1,720 per year for an average household.
Inflation compares current prices to 12 months previously. That means that last July, inflation was lower because energy prices had been falling, which dragged down the overall CPI figure.
How could the upcoming Budget impact inflation?
Reeves is under huge pressure to deliver a successful Budget following a series of scandals that have damaged Starmer’s Government, including the sacking of UK ambassador to the US Peter Mandelson over his association with Jeffrey Epstein, and the resignation of deputy prime minister Angela Rayner over her tax affairs.
“We suspect the measures in the Autumn Budget 2025 will not be directly inflationary, given they are likely to focus on inheritance, property and other wealth taxes — and the possible extension to the current freeze on income tax thresholds by two years to 2030,” explains Badiani.
Pugh says: “The most likely thing would be the reversal of the 5p fuel duty cut and increasing it by RPI [another measure of inflation], which would add a little over 0.1 per cent to inflation.
In terms of cutting inflation, he says any reductions in fuel duty or VAT could reduce the overall figure, with reports suggesting Labour is considering lowering VAT for energy bills.
There are also some factors that are beyond Government control.
Lower oil prices would feed through to lower production and energy costs, potentially cutting inflation.
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