Fears over inflation have increased as the price of manufacturers' raw materials rose by 2.6% in October, according to figures released by the Office for National Statistics (ONS).

The increase is the largest since June 2008 and has been driven by rising oil prices and the decline of the value of the pound.

"The manufacturers are in a difficult situation. If they increase their prices in response to rising input prices it has inflationary implications. It is more likely that they will try to absorb the costs, but that will squeeze margins and could affect employment and investment plans," said Howard Archer, chief UK and European economist at IHS Global Insight.