UK inflation rises to 3.5% before budget

UK inflation rose to 3.5% in September from 3.1% in August, the Office for National Statistics said Wednesday, adding pressure on the Labour government before its October 28 budget.

Separate official data showed government net borrowing reached £24.5 billion in September. The ONS also said public debt at the end of September was provisionally estimated to have exceeded £3 trillion for the first time, while debt as a share of gross domestic product fell by 0.7 percentage points to 94%.

The ONS said transport, particularly motor fuels, made the largest upward contribution to the inflation change. ONS chief economist Grant Fitzner said the annual cost of raw materials and goods leaving UK factories continued to rise, driven by higher crude oil and petrol prices.

Finance minister John Healey said price rises linked to conflicts in the Middle East and Europe were hitting Britain and other countries. He said his first budget would maintain fiscal discipline while giving businesses and families “some breathing space”.

Richard Flax, chief investment officer at Moneyfarm, said the key question was whether higher rates could contain inflation without adding pressure to an economy facing a difficult growth backdrop.