UK inflation rose to 3.5 per cent in September, intensifying pressure on businesses already struggling with high operating costs and raising fresh questions about the Bank of England's next interest rate decision.

The increase in the consumer prices index (CPI), reported by the Office for National Statistics, was driven in part by higher fuel prices and leaves inflation well above the Bank's 2 per cent target.

The figures come a week before the Chancellor's first Budget, with business groups calling for measures to ease energy bills, property taxes and other costs that have weighed on investment and confidence.

The British Chambers of Commerce (BCC) warned that persistent inflation was making it harder for companies to plan expenditure and commit to expansion.

Its latest survey of more than 4,000 businesses found that 60 per cent regarded inflation as a concern, making it the most frequently cited economic issue.

Caterina Batog, research and economics analyst at the BCC, said the latest figures were a reminder of the pressures facing employers.

“Inflation is casting a dark shadow over the businesses we represent, who are already struggling with a succession of high costs,” she said.

The BCC also warned that geopolitical tensions in the Middle East could increase energy costs, creating further inflationary pressure for businesses dependent on fuel and electricity.

The figures complicate the outlook for monetary policy. Inflation has remained above the Bank of England's target for two years, while policymakers must balance the risk of persistent price increases against weak economic growth.

Batog said the latest reading would add pressure on the Bank's Monetary Policy Committee to consider raising interest rates at its next meeting.

Higher borrowing costs would present another challenge for businesses seeking finance to invest in equipment, premises and additional staff.

The BCC urged the Chancellor to use the Budget to introduce targeted reductions in business taxation, particularly measures addressing energy costs and business rates.

“This high inflation landscape makes it even more crucial that the Chancellor uses his Budget to cut the cost of doing business,” Batog said.

The latest figures underline the difficult economic backdrop facing ministers as they attempt to encourage private investment without adding to inflationary pressures.