UK inflation hits 9.4% as prices rise at fastest rate for 40 years

·Finance Reporter, Yahoo Finance UK
·4-min read
Inflation A customer fuels her car with unleaded petrol at a Morrisons supermarket in Coalville, central England, October 15, 2008. Supermarket chain Morrisons have cut the price of petrol on their forecourts to below £1 ($1.744) for the first time since December last year.   REUTERS/Darren Staples   (BRITAIN)
Inflation: Fuel prices have soared in recent months, driven by the war in Ukraine. Photo: Darren Staples/Reuters

The rate of inflation has hit a fresh 40-year high, placing further pressure on UK households as the cost of living crisis mounts.

UK inflation, the rate at which prices rise, jumped to 9.4% in the 12 months to June from 9.1% in May, the Office for National Statistics (ONS) said.

The ONS said that June's inflation figure was partly due to a 42% year-on-year increase in petrol prices, and an increase of almost 10% in food prices.

Read more: Cost of living: Top tips to save money on a UK staycation

Food and non-alcoholic drinks rose by 9.8% in the year to June, the highest rate since March 2009. Milk, cheese and eggs as well as vegetables, meat and other food products such as ready meals became more expensive.

Average petrol prices stood at 184p a litre last month, up 18.1p since May alone, while diesel raced 12.7p higher to 192.4p a litre, which was also a record.

It comes on top of huge gas and electricity tariff increases, with the annual inflation rate standing at a record 70.2% and with further rises to come.

Inflation is at a record high
Inflation is at a record high

Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: “Annual inflation again rose to stand at its highest rate for over 40 years.

“The increase was driven by rising fuel and food prices, these were only slightly offset by falling second-hand car prices.

“The cost of both raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively.

“These increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high.”

Read more: UK workers suffer record drop in real terms pay

The prices paid by factories for materials and energy were 24% higher in June than a year earlier – the biggest increase since records began in 1985 – while prices charged by factories jumped by 16.5%.

Chancellor Nadhim Zahawi said: “Countries around the world are battling higher prices and I know how difficult that is for people right here in the UK, so we are working alongside the Bank of England to bear down on inflation.

“We’ve introduced £37bn worth of help for households, including at least £1,200 for eight million of the most vulnerable families and lifting over two million more of the lowest paid out of paying personal tax.”

Prices charged in restaurants and hotels rose by 8.6% in the year to June, up from 7.6% in May and the highest since August 2021. Clothing and footwear prices rose at a slower rate of 6.1%, down from 6.9% in May.

Bank of England governor Andrew Bailey said yesterday that a half-point increase in interest rates was “on the table” for next month, as the central bank considers toughening its anti-inflation stance.

Yael Selfin, chief economist at KPMG UK, said the peak in inflation is "still some way off", adding that energy bill increases in October would stop it from falling to the 2% before mid-2024.

Ofcom’s next review of the energy price cap is expected to push inflation above 11% in the autumn.

Read more: Cost of living crisis: Annual supermarket bills to rocket by £454

"This means more pain is on the way for household budgets as the high rate of inflation continues to outpace wage growth, bringing down the real value of incomes across the UK," Selfin said.

There is “bad news for everyone” in the latest inflation figures, Torsten Bell the chief executive of living standards think tank the Resolution Foundation said.

Anna Leach, deputy chief economist at the Confederation of British Industry warned inflation was likely to remain high for the rest of the year “severely eating into strained household incomes”.

She said: “This data underscores the need to give people more control over their energy bills: through speeding up planning decisions for electricity infrastructure and creating a national effort to help households better insulate their homes.

“But to build resilience to price shocks over the longer-term, the Government needs to focus on boosting the economy’s supply potential.

Watch: How does inflation affect interest rates?

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