UK inflation remains steady at 3.8%, reflecting a complex economic landscape.
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In September 2025, the inflation rate in the UK was reported at 3.8%, remaining unchanged since both July and August. This consistency came as a surprise to many economists, who had anticipated a slight increase to approximately 4%. The Consumer Prices Index (CPI), a key indicator of inflation, revealed that despite the rising costs of petrol, other factors such as the decreasing prices of food helped to stabilize the overall rate.
According to the Office for National Statistics (ONS), the CPI has remained at this level for three months, marking the highest recorded figures since January 2024. The previous peak at that time was 4.0%, indicating a prolonged period of elevated inflation within the UK economy.
Key drivers of inflation in September
Grant Fitzner, the chief economist at ONS, explained that various economic factors contributed to the unchanged inflation rate. He noted that the most significant upward pressures came from the prices of petrol and airfares, both of which saw a decrease in price rises compared to the previous year.
However, these increases were counterbalanced by a drop in costs for numerous recreational and cultural activities, which include live events.
Food prices show signs of relief
In a notable shift, the cost of food and non-alcoholic beverages fell for the first time since May of the previous year, coming down to 4.5% for the year leading to September from 5.1% in August. This change, albeit modest, may not be easily noticeable for consumers during their grocery shopping. Nevertheless, the easing of food prices provides a glimmer of hope amidst the ongoing economic challenges.
Government response and public sentiment
Chancellor Rachel Reeves expressed dissatisfaction with the current inflation rate, emphasizing the prolonged economic stagnation affecting households across the nation. Many individuals feel that they are working harder but not seeing proportional rewards, leading to a growing sense of frustration. The Chancellor is committed to supporting those grappling with the rising cost of living by striving for economic growth and creating a more equitable financial system.
On the other hand, Mel Stride, the shadow chancellor, criticized the government’s handling of the situation, pointing out that inflation significantly exceeds the Bank of England’s target of 2%. He argued that factors such as national insurance increases and insufficient spending cuts have contributed to the financial strain on families.
Public sector borrowing trends
Compounding the economic concerns, the public sector net borrowing in the UK reached a staggering £20.2 billion in September, marking the highest level for that month in five years. This figure represents a substantial increase of £1.6 billion compared to the same month in 2024. With the upcoming autumn budget planned for November 26, the government is expected to implement tax increases and spending cuts ranging from £20 billion to £30 billion to address the mounting borrowing pressures.
Fitzner highlighted that the rise in borrowing was largely due to increased debt interest and the costs associated with public services, which have all escalated compared to the previous year. As of September, the total borrowing for the financial year stood at £99.8 billion, reflecting a significant rise from the previous year’s figures.
Future outlook and economic implications
With the government facing significant fiscal challenges, Chancellor Reeves has reiterated the importance of maintaining control over public finances. The Treasury aims to reduce borrowing and is preparing to unveil plans that prioritize cutting waste and enhancing efficiency in public services. The objective is clear: to alleviate the burden of debt interest payments and redirect funds into essential sectors such as the NHS and education.
As the UK navigates through these turbulent economic waters, the upcoming budget will be scrutinized closely. Economists predict that a combination of tax hikes and spending reductions will be necessary to bring borrowing under control. The recent trends in inflation and public borrowing highlight the complexities of the current economic environment, emphasizing the need for careful consideration in policy decisions moving forward.
