UK Inflation Hits 3.5 Percent as Factory Gate Prices Post the Largest Rise Since April 2023
UK consumer price inflation rose to 3.5 percent in the year to September, up from 3.1 percent in August and the highest rate since October 2025, the Office for National Statistics said on 21 October. The rise reached beyond the petrol pump. Core inflation and services both climbed in the same month. Factory gate prices rose 4.6 percent on the year, the largest rise since April 2023.
The rise spread beyond fuel
Motor fuels were 29.8 percent dearer than a year earlier, against 23.0 percent in August. Petrol reached 169.5 pence a litre after an 8.2 pence rise in the month, its highest price since August 2022. Diesel reached 192.5 pence after a 10.7 pence rise, the highest since July 2022. Across August and September, petrol has added 17.3 pence a litre and diesel 24.9 pence, on our sum of the two monthly moves.
Core CPI rose to 2.8 percent from 2.6 percent. Services inflation rose to 3.7 percent from 3.4 percent. Transport services, particularly air fares, gave the largest upward push. Goods inflation reached 3.2 percent, up from 2.7 percent and the highest since September 2023.
Consumer prices rose 0.4 percent in September, against little change in September 2025. On our reading, that gap is what lifted the annual rate. Recreation and culture added to it: its annual rate rose to 2.3 percent from 1.6 percent. Restaurants and hotels went the other way, slowing to 3.8 percent from 4.1 percent as hotel prices rose less than a year earlier.
Food stayed calm. Food and non-alcoholic drink inflation was 1.3 percent for a third straight month, a rate last lower in September 2021.
On our calculation, the headline rate is now 0.9 percentage points above its lowest rate of the past year, 2.6 percent in June. The gap between headline and core widened to 0.7 points from 0.5 points, on our calculation, so the items core leaves out explain part of the move. Goods are closing on services. On our calculation, the services rate runs 0.5 points above goods, against 0.7 points in August.
CPIH rose to 3.6 percent from 3.3 percent. Owner occupiers’ housing costs rose 4.0 percent on the year. Electricity, gas and other fuels made their largest contribution since September 2025. Kerosene prices rose 22.7 percent in the month, against a 1.4 percent fall a year earlier. The retail prices index ran at 3.9 percent.
UK consumer prices, annual rates
| Measure | August 2026 | September 2026 |
|---|---|---|
| CPI | 3.1% | 3.5% |
| CPIH | 3.3% | 3.6% |
| Core CPI | 2.6% | 2.8% |
| CPI goods | 2.7% | 3.2% |
| CPI services | 3.4% | 3.7% |
| Motor fuels | 23.0% | 29.8% |
| Food and non-alcoholic drink | 1.3% | 1.3% |
Consumer price inflation, UK: September 2026, published 21 October 2026.
The factory pipeline is filling
Producer prices point the same way. Input prices rose 8.3 percent in the year to September, up from a revised 6.7 percent. Output prices, the factory gate measure, rose 4.6 percent from a revised 3.8 percent. In the month alone, input prices rose 1.5 percent, the largest monthly rise since April, on our count.
Crude oil inputs rose 14.0 percent in September and 51.0 percent on the year. On the output side, coke and refined petroleum products rose 9.1 percent in the month and 63.3 percent on the year. Crude petroleum and natural gas, grouped with metal ores, carry a 6.9 percent weight in the input index. Coke and refined petroleum products carry 4.5 percent of the output index. The release says the data continue to be affected by the conflict in the Middle East.
From February to September, input prices rose 7.3 percent, factory gate prices 5.1 percent and consumer prices 2.9 percent, on our calculation from the published index levels. So far each stage has risen less than the one before it, on our reading.
The import price index rose 9.9 percent on the year, while the sterling effective exchange rate was 0.3 percent higher than a year earlier. Food prices fell at the producer stage. Domestic food inputs were 1.3 percent cheaper than a year earlier, and food products at the factory gate 0.6 percent cheaper. On our reading, that fits the steady food rate in the shops.
Services producers are charging more as well. Their prices rose 4.5 percent in the year to the third quarter, the most since the second quarter of 2023. Transportation and storage rose 10.7 percent, on higher shipping rates and fuel charges.
UK producer prices, annual rates
| Measure | August 2026 | September 2026 |
|---|---|---|
| Input prices | 6.7% | 8.3% |
| Output prices | 3.8% | 4.6% |
| Crude oil inputs | 29.9% | 51.0% |
| Coke and refined petroleum outputs | 50.8% | 63.3% |
| Import price index | 7.3% | 9.9% |
Producer price inflation, UK: September 2026, published 21 October 2026. August figures are as revised in this release; August and September are provisional. Input index 169.7 and output index 151.0 in September.
The Bank’s margin is thin
The Bank of England targets 2 percent CPI inflation. September’s 3.5 percent is 1.5 points above that target, or 1.75 times it, on our calculation. Bank Rate stands at 3.75 percent, and the next decision is due on 5 November.
That leaves Bank Rate 0.25 points above headline inflation, on our calculation. Against services inflation the gap shrinks to 0.05 points, on our calculation.
Bank Rate against September inflation
| Measure | September 2026 | Bank Rate minus rate, points |
|---|---|---|
| CPI | 3.5% | 0.25 |
| CPIH | 3.6% | 0.15 |
| CPI services | 3.7% | 0.05 |
| Core CPI | 2.8% | 0.95 |
Bank Rate of 3.75 percent as published by the Bank; inflation rates for September 2026 from the consumer price release. Differences are our calculation.
Why it matters: In September, core and services inflation rose alongside fuel. Bank Rate now sits 0.25 points above headline inflation, on our calculation. Factory gate prices are also rising faster than shop prices. On our reading, that leaves the Bank less room to treat the jump as a passing fuel effect.
Outlook: October’s figures, due on 18 November alongside the next producer prices, face a high base. Consumer prices rose 0.4 percent in October 2025. On our reading, the annual rate climbs again only if this October’s monthly rise is larger. The Bank decides on 5 November, before those numbers land. Input prices are 8.3 percent higher than a year earlier. On our reading, that points to more goods inflation ahead.
Sources: Office for National Statistics, Bank of England, The Edge.
