RECORD oil prices were last night blamed for the sharpest annual rise in the cost of goods leaving UK factories in more than eight years.

The figures, which show a 3.1 per cent increase in prices in the year to September, were announced on the day that the cost of Brent crude in London broke through the $50 a barrel mark for the first time.

City experts said the willingness of companies to pass on the higher energy costs raised fears of inflationary pressures building in the UK economy.

The Office for National Statistics (ONS) said a 0.3 per cent rise in its output prices index between August and September had left the annual increase at its highest level since a similar gain of 3.1 per cent in April 1996.

The increase was in response to the largest annual rise in the costs faced by companies in almost four years.

With crude oil prices up 45 per cent in the year to September, the ONS said input costs rose 7.3 per cent in the same period and by 1.3 per cent between August and September.

Simon Rubinsohn, chief economist at Gerrard, said the figures would concern the Bank of England's Monetary Policy Committee (MPC), although he believed members will resist the temptation to raise rates next month in order to cool inflation.

In the three months to the end of August, the deficit on trade in goods and services worsened to an all-time high of £11.2bn, from a £9.1bn gap in the previous quarter.