The rate of inflation in the United Kingdom has reached a new 40-year high, putting further financial strain on household budgets as the cost of living crisis rises with the strongest inflation since 1982.

Data released by the UK’s Office for National Statistics (ONS) shows rising petrol and diesel prices for motorists and costlier food has pushed inflation to 9.4 percent for the month of June in comparison with the same month last year. 

The ONS pointed out the inflation rate was partly due to a massive 42 percent year-on-year rise in petrol prices and an increase of almost ten percent in food prices.

Reacting to the news, the ONS chief economist, Grant Fitzner has said “annual inflation again rose to stand at its highest rate for over 40 years. The increase was driven by rising fuel and food prices; these were only slightly offset by falling secondhand car prices.”

While energy costs was a leading cause of rising inflation, food prices also played a leading role, with particularly sharp increases in the cost of milk, eggs, and cheese all contributing to a 1.2 percent increase between May and June and a 12-month rise of 9.8 percent. 

This is while the prices paid by factories for their materials as well as their energy was 24 percent higher in June than a year earlier, that’s the biggest increase since records began in 1985, while prices charged by factories jumped by 16.5 percent. 

The data is slightly higher than what forecasters had expected, many economists had been predicting inflation would climb by up to 9.3 percent after the price of unleaded petrol increased by around 20 pence a liter in June. 

The new figures are yet another increase from the numbers released last month for May which showed inflation had risen by 9.1 percent. 

The latest data means the UK had the highest rate of inflation in June among the Group of Seven industrialized states. While Canada and Japan have both yet to report their June data, economists say neither are likely to come close to the UK’s consumer price index. 

While their has been a global rise in the costs of energy and different commodity prices, the world’s supposedly fifth largest economy has been among the hardest hit among the world’s wealthiest nations 

Last year, in June 2021, inflation stood at 2.5 percent and has now increased for nine consecutive months but the worrying signs for the UK are that inflation has yet to hit its peak in the UK. 

More inflationary pressure could be on the way, according to separate ONS data for producer prices, which measures how much firms are paying for their fuel and raw material and the prices they charge their customers.

“The cost of both raw materials and goods leaving factories continued to rise, driven by higher metal and food prices respectively,” Fitzner said, “these increases saw raw materials post their highest annual increase on record, with manufactured goods at a 45-year high.”

The Bank of England also expects the cost of living to increase even further with inflation hitting above eleven percent in the Autumn when bills for energy are expected to rise again. 

The stock markets are expecting the Central Bank to respond to the record inflation levels since February 1982 by raising interest rates by either 0.25 or 0.5 percentage points next month.

Yael Selfin, chief economist at KPMG UK, told British media the peak in inflation is "still some way off", adding that energy bill increases at the start of Autumn would stop it from falling to two percent before the middle of 2024.

"This means more pain is on the way for household budgets as the high rate of inflation continues to outpace wage growth, bringing down the real value of incomes across the UK.” He said, adding "we also expect the Bank of England to continue raising the base interest rate, which we now expect to reach two percent early next year, to stave off further rounds of inflation rises."

The main opposition party’s Labour's shadow chancellor, Rachel Reeves, said "the cost of living crisis is leaving families more worried every day, but all we get from the [ruling Conservative Party] is chaos, distraction and unfunded fantasy economics.”

"Rising inflation may be pushing family finances to the brink, but the low wage spiral facing so many in Britain isn't new. It's the result of a decade of Tory mismanagement of our economy meaning living standards and real wages have failed to grow.”

"We need more than sticking plasters to get us back on course - we need a stronger and more secure economy.”

Economic experts say that like the eurozone, the UK is heavily dependent on gas imports, which has left it exposed to volatile energy prices. These have been driven first by a resurgence in demand in the wake of the coronavirus pandemic and then by the conflict in Ukraine. 

The latest grim data comes on the backdrop of news that British workers are suffering from the biggest drop in wages in more than 20 years, as rising food, energy, and oil prices are strongly affecting the paychecks of workers. 

According to the ONS data, when taking into consideration the effect of inflation, workers' wages slumped by 2.8 percent between March and May in comparison with the same time
frame last year. That's the fastest decline since the records office started keeping track in 2001.

Meanwhile, data released by the research company Kantar this week, inflation for grocery prices hit nearly ten percent in the four weeks ending on July 10. That means British households can expect to spend an extra £454 ($545) this year on food and other vital essentials.

In addition, the energy research firm Cornwall Insight says bills for energy usage which had risen by 54 percent in April, is estimated to top £3,000 ($3,603) per year for millions of households starting from October. Households are, in essence, the ones feeling the strain of the rising costs of the energy and food crises. 

The British currency the pound has also been strongly hit this year, losing eleven percent of its value against the U.S. dollar, which is making it more expensive for families to travel abroad or for businesses to import goods 

It has also been one of the key talking points of public debates among the remaining candidates in the race to replace Boris Johnson as prime minister. Yet critics say not much will be done and the campaign pledges are only aimed at gaining popularity with the public ahead of the General elections.

Critics argue that government officials and whoever replaces Johnson are out of touch with working-class families and not taking any real measures to address their financial problems. The soaring cost of living crisis has triggered a wave of industrial action by trade unions.

These have hit a whole range of sectors including transport such as railway and airport causing travel chaos. In addition to railway workers, barristers, firefighters, doctors, postal office workers, teachers, nurses, civil servants, and council workers; even British telecom engineers are among a wave of Britons considering or taking strike action. 

The country has also witnessed protests, in which people from all walks of life, have participated to vent their mounting anger at the government for its failure to provide a sufficient safety net against a population that is increasingly heading into poverty.