UK inflation rises to 3.3% as fuel costs surge

UK inflation increased to 3.3% in the year to March 2026, driven largely by rising fuel prices linked to ongoing geopolitical tensions, according to the latest data from the Office for National Statistics (ONS).

The Consumer Prices Index (CPI) rose from 3.0% in February, remaining well above the Bank of England’s 2% target and reinforcing concerns that inflationary pressures may prove more persistent than previously expected.

On a monthly basis, CPI increased by 0.7% in March, more than double the 0.3% rise recorded in the same month last year, highlighting the renewed upward momentum in prices.

The broader CPIH measure, which includes owner occupiers’ housing costs, also climbed to 3.4% annually, up from 3.2% in February, with a monthly increase of 0.6%.

The ONS said motor fuels made the largest upward contribution to both CPI and CPIH, with prices experiencing their sharpest increase in more than three years. The rise has been linked to disruption in global energy markets following the Iran war.

ONS chief economist Grant Fitzner said higher fuel costs were the main driver behind the increase, alongside rising airfares and food prices. Clothing prices, meanwhile, provided the largest downward contribution, partially offsetting the overall rise.

Core inflation measures showed a mixed picture. Core CPI, which excludes energy, food, alcohol and tobacco, edged down slightly to 3.1%, while core CPIH also eased marginally to 3.3%. However, services inflation – closely watched by policymakers – continued to climb, reaching 4.5% under CPI.

The latest figures are likely to complicate the outlook for interest rates. The Bank of England had previously held rates steady, but warned that prolonged geopolitical disruption could force further action to prevent inflation becoming entrenched.

Prior to the escalation in the Iran conflict, economists had expected inflation to fall sharply in April, potentially nearing the 2% target. However, forecasts have since been revised, with many now expecting inflation to remain elevated throughout the year.

“An uptick in headline inflation suggests geopolitical tensions are beginning to feed through to costs and supply chains – but will hopefully be short-lived, and not the start of a more persistent trend.

“This news could delay future rate cuts, putting pressure on borrowing costs and tightening margins for SMEs. But with the right access to finance – there is still room for businesses to invest and grow,” he said.

Higher inflation and the prospect of sustained interest rates could create challenges for UK businesses, especially those reliant on financing for growth and investment.

Randall added that despite these pressures, access to finance remains critical in enabling businesses to continue expanding.

“While global pressures will continue to demand the Government’s attention, it must not lose sight of those driving the UK economy forward – and give SMEs the backing they need to keep moving ahead.”