British drivers have been warned of record fuel costs this week as diesel prices climbed to £2 a litre, surpassing the previous record set in 2022 after Russia’s invasion of Ukraine. The RAC confirmed the milestone, which arrives at a moment when energy costs are once again feeding into Britain’s inflation outlook.
Record prices at the pumps
The pump-price surge adds immediate pressure to transport, haulage and supply-chain costs. Businesses have already raised their 12-month inflation expectations from 3.1% to 3.3%, with energy costs widely cited as a factor pushing up selling prices, according to the Bank of England’s latest Decision Maker Panel.
Against that backdrop, the Bank of England remains divided over whether interest rates, currently at 3.75%, will need to rise again. Policymakers are weighing persistent energy-driven inflation against weakness in the labour market and easing food inflation.
A transatlantic supply threat
Compounding the pressure, ministers privately warned that Britain could face diesel shortages if the United States follows through on a threat to ban fuel exports. Britain imports around 55% of the diesel it consumes, with roughly a third of those imports coming from the United States.
US President Donald Trump told Fox News he was considering an all-out ban on diesel exports, saying the administration was looking at it “very seriously”. Relief arrived when G7 leaders agreed to release 100 million barrels of crude oil and diesel from emergency stocks to ease global supply pressure — a move that prompted Trump to withdraw the export-ban threat.
Even so, supply conditions remain fragile: Russia has extended its diesel export ban until the end of October, China has reportedly suspended exports for the month, and attacks on shipping through the Strait of Hormuz continue to constrain supplies, with Brent crude holding around $98–$102 a barrel.
SMEs press for Budget relief
With the Budget due on 28 October, business groups are urging the Chancellor to offer relief from rising operating costs and stronger action on late payments. EY economists estimate the Chancellor’s fiscal headroom has fallen from £23.6bn in March to about £11.3bn, and warn that prolonged disruption to the Strait of Hormuz could push UK inflation towards 6% by Christmas.