Soaring costs for fuel and foodstuffs and the slump in the pound pushed prices for goods leaving factories up at the fastest pace in more than two decades last month.

The record inflation at factory gates inflamed fears over the threat of still steeper increases in Britain's rising cost of living and dealt a blow to hopes for a new interest rate cut next month. City economists said that the inflationary threat revealed by yesterday's official figures was likely to scupper a widely expected June cut in base rates.

Anxieties over price pressures were fuelled by a spate of warnings yesterday from manufacturers and consumer groups of steep increases still to come in the cost of items from utilities bills to a pint of milk. Yesterday's figures showed that prices charged by manufacturers leapt by

1.4 per cent last month, in the biggest monthly increase since 1986. April's jump left factory gate prices up 7.5 per cent from a year earlier, also a record.

The steep rise in output price inflation came as manufacturers passed on some of their sharply higher costs for energy and raw materials, which registered a record 2.4 per cent gain last month. That left industry costs up by a massive 23.1 per cent from a year earlier, setting yet another record.

The driving force was the hefty increase in the cost of oil and its knock-on effect on petrol prices that are already above £5 a gallon. Crude oil prices, which yesterday moved above $126 for the first time, climbed by 6.4 per cent last month and were up by 63 per cent in a year.

Intense concern over the soaring cost of food was also stoked by yesterday's figures, as prices for food leaving UK factories rose at an annual rate of 9.3 per cent. Cost pressures for supermarkets and across the economy are being heightened by a sharp slide in the pound, down 12 per cent over the past year, boosting import bills. Imported food prices are up by a fifth in a year, while import prices for goods as a whole are up more than 10 per cent.

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