Inflation increases to 3.1% after spike in petrol prices

Surging fuel prices helped drive UK inflation higher again last month, according to official figures.

The uptick was in line with predictions from economists and points to an upward trajectory for inflation since hitting a 15-month-low of 2.6% in June.

Motor fuels contributed significantly to the rise in inflation, after the average price of petrol rose by 9.1 pence per litre between July and August, reaching an average of 161.3 pence per litre.

ONS chief economist Grant Fitzner said: “Sharp price rises for petrol and diesel pushed inflation up again in August.

“Higher airfares, particularly for long-haul journeys, also contributed to the increase.”

A surge in petrol prices has put pressure on inflation (Photo by Leon Neal/Getty Images)

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The jump in fuel costs highlights the early impact of the breakdown of the US-Iran ceasefire in July, which led to a renewed surge in oil and gas prices.

Elsewhere in the transport sector, the latest figures also showed a 6.2% increase in airfares for the month after an increase in the cost of long-haul flights.

Food and drink inflation remained steady at 1.3% despite warnings that it could be pushed higher by rising energy costs.

It comes as Chancellor John Healey prepares for his first Budget since being appointed in the summer by Prime Minister Andy Burnham.

The Budget, due on October 28, comes at a time of increased financial pressures caused by the conflict in Iran, which, as well as sending fuel prices soaring, has pushed up the cost of borrowing for the UK Government.

Mr Healey, responding to the August rise in inflation, said: “The war in the Middle East is impacting on inflation worldwide, not just here at home.

“In our bills, our weekly shop and at the petrol pumps.

“We have taken early action to help families and businesses breathing space, by cutting tax on electricity bills, capping bus fares at £2 and lowering rates for pubs, social clubs and live music venues.

“Despite this serious global uncertainty, our UK economy is proving resilient, and our determination to deliver and growth in every postcode continues.”

The yield on 10-year UK gilts - what amounts to the cost of borrowing for the Government, and known also as bonds - stretched to 5.41%, a 19-year high on Tuesday.

The inflation increase and higher yields come ahead of an interest rate decision due on Thursday by the Bank of England.

Before the inflation announcement, analysts had expected the Bank to hold interest rates at 3.75%.