Inflation in the UK has hit a 41-year high as soaring food, fuel and energy prices drove up the Consumer Price Index once again.
The annual rate rose to a higher-than-expected 11.1 per cent, up from 10.1 per cent last month, the Office for National Statistics said on Wednesday.
The increase was stronger than the Bank of England's 10.9 per cent forecast and the 10.7 per cent median predicted by economists.
Inflation would have reached 13.8 per cent had the government not introduced an energy price guarantee that limited the increase in electricity and natural gas prices, the ONS said.
Experts said the rise would heighten demand for the government to do more to ease the nation’s cost-of-living crisis when it reveals new tax and spending plans on Thursday.
Chancellor Jeremy Hunt said “tough but necessary” decisions were required to tackle rising prices.
“It is our duty to help the Bank of England in their mission to return inflation to target by acting responsibly with the nation’s finances,” he said.
“That requires some tough but necessary decisions on tax and spending to help balance the books.”
The BoE this month announced its biggest interest rate rise since 1989 to combat inflation and warned the UK economy may experience a record-long recession until mid-2024.
The bank said it was lifting borrowing costs by 0.75 percentage points to 3 per cent, the highest level since the 2008 global financial crisis, to cool UK inflation that it predicted would peak at almost 11 per cent — lower than it is now.
Experts said the latest rise in inflation added to the pressure on the BoE to raise interest rates again.
The ONS said gas prices had jumped nearly 130 per cent in the past year, while the price of electricity has risen by 66 per cent.
Families were also hit by rising food costs, which pushed up the cost of living to eye-watering levels.
The rise in inflation — the biggest since March to April — comes despite the government's support package, which has sought to limit Ofgem's energy price cap at about £2,500 a year.
Grant Fitzner, chief economist at the ONS, said the energy price cap could not stop rising gas and electricity costs, as well as the price of food, driving up inflation.
He added: “These were partially offset by motor fuels, where average petrol prices fell on the month, while the price for diesel rose taking the disparity in price between the two fuels to the highest on record.
“There was further evidence that costs facing businesses are rising more slowly, driven by crude oil and petroleum prices.”
The pound rose as much as 0.3 per cent to $1.1901 after the release.
Money markets add as much as 10 basis points to rate increase bets, pricing interest rates to peak around 4.65 per cent by August.
“It is still unclear if we are reaching peak inflation for the year but nevertheless this is a tough period for public markets,” said Andrew Aldridge, a partner at Deepbridge Capital.
Alice Haine, personal finance analyst at Bestinvest, the DIY investment platform and coaching service, said current levels of inflation were “difficult for consumers to digest when you consider all the other challenges hammering household finances at the moment — from rapidly rising interest rates to falling real incomes, a looming recession and the prospect of higher taxes in this week’s Autumn Statement”.
“Inflation has been on the rise since the second quarter of 2021 when pandemic-fuelled supply chain shortages converged with soaring consumer demand as economies reopened from lockdown.”
She said inflation was likely to ease going forward, with an expected raft of tax rises, interest rates at 3 per cent and climbing, and mortgage costs still high compared to the past decade.
Andrew Megson, chief executive of My Pension Expert, said research by the company showed that more than a quarter (26 per cent) of people in Britain aged 40 and above no longer had confidence in their pension due to such economic volatility.
“Something must be done to alleviate this crippling financial pressure,” he said.
“All eyes will be on the Chancellor tomorrow, with the hope that he can provide some much-needed reassurances to struggling pension planners. Finally, giving a clear answer regarding the future of the triple lock would be a step in the right direction. However, such action alone will not be enough.
“The government must provide long-term support to help Britons better understand their financial situation and make informed choices to protect their money.”
The Saga Continues
Wu-Tang Clan
(36 Chambers / Entertainment One)
'Gold'
Director:Anthony Hayes
Stars:Zaf Efron, Anthony Hayes
Rating:3/5
Notable salonnières of the Middle East through history
Al Khasan (Okaz, Saudi Arabia)
Tamadir bint Amr Al Harith, known simply as Al Khasan, was a poet from Najd famed for elegies, earning great renown for the eulogy of her brothers Mu’awiyah and Sakhr, both killed in tribal wars. Although not a salonnière, this prestigious 7th century poet fostered a culture of literary criticism and could be found standing in the souq of Okaz and reciting her poetry, publicly pronouncing her views and inviting others to join in the debate on scholarship. She later converted to Islam.
Maryana Marrash (Aleppo)
A poet and writer, Marrash helped revive the tradition of the salon and was an active part of the Nadha movement, or Arab Renaissance. Born to an established family in Aleppo in Ottoman Syria in 1848, Marrash was educated at missionary schools in Aleppo and Beirut at a time when many women did not receive an education. After touring Europe, she began to host salons where writers played chess and cards, competed in the art of poetry, and discussed literature and politics. An accomplished singer and canon player, music and dancing were a part of these evenings.
Princess Nazil Fadil (Cairo)
Princess Nazil Fadil gathered religious, literary and political elite together at her Cairo palace, although she stopped short of inviting women. The princess, a niece of Khedive Ismail, believed that Egypt’s situation could only be solved through education and she donated her own property to help fund the first modern Egyptian University in Cairo.
Mayy Ziyadah (Cairo)
Ziyadah was the first to entertain both men and women at her Cairo salon, founded in 1913. The writer, poet, public speaker and critic, her writing explored language, religious identity, language, nationalism and hierarchy. Born in Nazareth, Palestine, to a Lebanese father and Palestinian mother, her salon was open to different social classes and earned comparisons with souq of where Al Khansa herself once recited.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
