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Inflation remains steady despite lower fuel prices
The UK's annual inflation rate stayed at 3% in February, matching January's figure, as cheaper fuel was offset by higher clothing costs, official data showed.
The Office for National Statistics (ONS) reported that the rate of price increases held steady after months of declines, though it remains above the Bank of England's 2% target.
Fuel prices plunge before conflict, then surge
Petrol prices hit their lowest level since June 2021 in February, averaging 131.6p per litre, while diesel stood at 141.1p, the ONS said. However, these figures were collected before the escalation of the US-Israel conflict with Iran, which triggered a sharp rise in wholesale oil prices.
By mid-March, petrol had climbed to 149.4p per litre and diesel to 175.7p, according to RAC data, with experts warning of further increases.
Businesses feel the squeeze
James Palmer, who runs Acme Bus Company in Saffron Walden, said the volatility in fuel costs has disrupted operations. His company, which transports hundreds of schoolchildren daily in Essex and Hertfordshire, saw bulk fuel prices jump from £1.21 to £1.86 per litre in three weeks.
"The unpredictability is the hardest part-you don't know what tomorrow's price will be, or even if you'll be able to secure fuel at all," Palmer said.
Heating oil costs soar for off-grid businesses
Daniel Pilley, owner of The Gainsborough Health Club and Spa in Suffolk, said his business, which relies on heating oil for its pool facilities, has faced a dramatic price increase. The cost of 500 litres of oil per week surged from 59p to £1.50 per litre in two weeks.
"This is outright profiteering by oil companies, and the government needs to intervene quickly," Pilley said.
The UK's competition regulator is investigating reports of profiteering in the heating oil sector, though industry representatives argue providers are merely responding to market prices.
Inflation outlook darkens amid geopolitical tensions
Economists now expect inflation to rise rather than fall this year, with Capital Economics forecasting a peak of 4.6% by December due to the conflict's impact on energy and food costs. The Bank of England may delay interest rate cuts or even raise rates to curb inflation.
Chancellor Rachel Reeves acknowledged the challenges, stating her government is taking steps to ease living costs, including measures to lower food prices and reduce energy market red tape. However, analysts say these efforts could be undermined by the war's economic fallout.
Wages fail to keep pace with potential price hikes
Last week's data showed UK wage growth slowing to its lowest rate in over five years. While pay is currently outpacing inflation, the gap could narrow if the conflict drives prices higher.
