Inflation in Britain Reaches 11.1 Percent, Led by Energy Costs

Britain’s cost-of-living crisis deepened in October, as consumer prices surged 11.1 percent from a year earlier, the highest in more than 40 years, as households struggle to keep up with large increases in the price of food, heating and gas.

The increase, which was higher than expected, came after the annual inflation rate had reached 10.1 percent in September.

Despite a government support plan designed to shield households and businesses from the scourge of skyrocketing energy bills, gas and electricity prices were the biggest driver behind the sharp run-up in consumer prices, the Office for National Statistics said. The cost of food also marched higher, for the 15th straight month.

The inflationary surge comes as Britain grapples with the prospect of a drawn-out recession, fueling the worst cost-of-living crisis in four decades. The British economy shrank 0.2 percent between July and September compared with the previous three months, and central bankers have warned of a “prolonged” downturn lasting up to two years.

A broader recession is expected to spread to the continent by the end of the year, with countries from France to Finland facing a double blow of rising inflation and slowing or declining growth. Russia’s war in Ukraine, and retaliatory sanctions against Russia by European countries, have caused global fuel, food and fertilizer prices to soar.

Wages in Britain increased 5.7 percent in the third quarter, their fastest pace in 20 years, as people re-entered the work force following the end of Britain’s pandemic lockdowns. But inflation is rising so fast that it is outstripping those gains, leaving households struggling to keep up.

And some of the employment gains mask an underlying precariousness, with many people re-entering the labor market as self-employed workers. When adjusted for rising prices, wages overall fell by 2.7 percent in September.

To bring inflation down, the Bank of England is trying to curb economic growth with a series of interest rate increases. Earlier this month the central bank raised interest rates by three-quarters of a point to 3 percent, the highest since 2008.

But the moves have put further financial pressure on homeowners already worried about rising costs, because they keep mortgage rates high and will have the effect of cooling an economy that is already slowing down. The cost of housing and household services jumped by over 26 percent in October from a year ago.

Britain’s economy is also suffering from a series of self-inflicted wounds by the governing Conservative Party. The prime minister, Rishi Sunak, has made it clear that he intends to take a tougher approach to public finances after a period of turmoil under the preceding leader, Liz Truss, who pushed economic policies during a short-lived tenure that threw Britain into financial turmoil.

On Thursday, Mr. Sunak and the chancellor of the Exchequer, Jeremy Hunt, are expected to announce tax increases and spending cuts alongside a plan to cut Britain’s debt.

The statement is expected to detail spending and tax policies in line with lowering Britain’s debt burden. It will be accompanied by forecasts from the Office for Budget Responsibility, an independent government watchdog that will assess the impact of the government’s policies on the economy and public finances.