LONDON, Oct. 30 (Xinhua) -- Britain's sustained high inflation is undermining the confidence of businesses and consumers, while limiting the space for further interest rate cuts. It puts the resilience of the economy at test right before the upcoming Budget in November, with analysts calling for avoiding further cost rises.

CPI KEEPS CLIMBING

The country's consumer price index (CPI) rose 3.8 percent year on year in September 2025, almost twice as high as the Bank of England (BoE)'s 2 percent target. The September, August and July figures were the joint-highest since January 2024, when the rate was 4 percent, according to the Office for National Statistics (ONS).

Britain's food price hikes are prominent this year. In August, food price inflation climbed for the fifth consecutive month. The annual inflation rate for food and non-alcoholic drinks hit 5.1 percent, the highest since January 2024.

Leaders from nine of Britain's biggest supermarkets have recently written a letter to the Chancellor, urging her to exclude shops from the proposed business rates surtax.

"The growing cost pressures on the retail industry mean that food inflation has been rising steadily over the last year and is expected to rise further, carrying headline inflation with it, and limiting the ability of the BoE to lower interest rates," according to the letter.

Supermarkets are doing everything possible to keep food prices affordable, but it is an uphill battle with over 7 billion pounds (9 billion U.S. dollars) in additional costs in 2025 alone, derived from higher National Insurance contributions to new packaging taxes, said Helen Dickinson, chief executive of the British Retail Consortium (BRC).

She noted large retail stores sustain nearly one million British jobs and already contribute a third of all retail's business rates, stressing that exempting shops from the new business rates surtax, which is levied on all large commercial premises, will not only help tackle food inflation but also support employment and investment across the country.

Britain's September inflation rate was well above that for the European Union (EU), which stood at 2.6 percent, according to the ONS. The last time the rate was lower than the EU rate was in December 2024.

In late September, the Organization for Economic Cooperation and Development (OECD) raised its forecast for UK inflation across 2025 from 3.1 percent to 3.5 percent, the highest among G7 economies.

CHALLENGING ECONOMY

John Bryson, professor in economic geography at the University of Birmingham, commented that inflation is a major challenge for the UK and this has been highlighted by the OECD. "Part of the problem reflects the outcome of decisions that were made in the autumn 2024 Budget that added inflationary pressures to the country and this continues to impact on UK inflation," he said.

"Sticky inflation has been in danger of becoming a uniquely British disease," said David Bharier, head of research at the British Chambers of Commerce (BCC).

A recent survey from BCC showed that concern about inflation has been rising again and is now the second biggest issue for firms after taxation, Bharier said, noting the two issues are closed linked.

"For the past year, businesses have told us that the rise in employer National Insurance contributions has fed directly into price pressures and weakened investment," he added.

On the consumer side, inflation has become one of the biggest concerns among the public. Dickinson said rising inflation and a potentially taxing Budget is weighing on the minds of many households planning their Christmas spending.

Cautious of the loop of tax rises, higher inflation and slower growth, analysts called for excluding cost hikes in the upcoming Budget. Bryson said the government should be mindful of the impacts that its policies can have on driving inflation.

Kris Hamer, director of insight at the BRC, believes the government must use what levers it has to hold back the rising tide of inflation. "Reform of business rates -- delivering a meaningful cut for retailers with no shop paying more -- would drive and help deliver better value for customers," he said.

Business leaders are calling for a reduction in government-generated costs -- whether through a lower tax burden or lighter regulation, said Anna Leach, chief economist at the Institute of Directors.