UK inflation soars to fresh 40-year high as fuel and energy prices rocket amid cost of living crisis

The rate of inflation has surged to a fresh 40-year high in the UK as fuel and energy prices rocketed amid the cost of living squeeze.

Consumer Prices Index (CPI) inflation rose to 9.4% in June, up from May’s reading of 9.1%, the Office for National Statistics (ONS) said.

This remains the highest level since February 1982 and puts further strain on cash-strapped households and businesses.

What caused inflation to rise?

The rise in inflation was driven by rising fuel and food prices, ONS data shows, which were only slightly offset by falling second-hand car prices.

The ONS said that the cost of motor fuels jumped by 42.3% in the 12 months to June, marking the biggest leap since records began.

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.

Britons are also being hit by sharply higher grocery bills, with food and non-alcoholic drink prices having risen by 9.8% in the year to June 2022 – the highest rate since March 2009.

Food prices lifted 1.2% month on month in June, which follows similar increases in April and May as higher cost pressures and the impact of the Ukraine war filter down to supermarket shelves.

The largest upward effect came from essential items such as milk, cheese and eggs, the ONS said, but big price rises were also seen for vegetables, meat and other food products, like ready meals.

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.

Figures also show that the CPIH, which includes owner-occupiers’ housing costs and is the ONS’s preferred measure of inflation, rose by 8.2% in June, up from 7.9% in May. Meanwhile the Retail Prices Index (RPI) rose from 11.7% in May to 11.8% in June.

Grant Fitzner, chief economist at the 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.”

Newly appointed Chancellor Nadhim Zahawi and Bank of England Governor Andrew Bailey have both pledged to get inflation under control.

Mr 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.”

In a speech in London on Tuesday evening (19 July), Mr Bailey said a bigger interest rate rise will be one of the options being mooted at the next meeting of the Bank of England’s decision-makers.

He said a 50 basis percentage point rise – which would take rates from 1.25% to 1.75% – is being considered as part of its vow to “act forcefully” if inflation shows signs of becoming embedded in the economy.

But The Bank of England is expecting inflation to rise even further in the autumn when Ofcom’s next review of the energy price cap is predicted to push it above 11%, with annual bills to cost almost £3,000.

The current cap of £1,971 is already a record which beat the previous high by 54%, but the next period, which runs from October to December, is expected to soar to £2,980.