The Bank of England's decision to raise interest rates for the second consecutive month has been attacked by a business support group.

Sussex Enterprise said the 0.25 per cent rise, which took the base rate to 4.5 per cent, was potentially damaging for the region's manufacturing sector.

Steven Gauge, the group's director of membership and communication, accused the Government of taking economic growth for granted.

He said: "The rise in interest rates could push up the value of the pound, placing Sussex and UK exporters under unnecessary financial pressure.

"If the Government wishes to curb rising house prices, the sensible solution is for local authorities to free up land for new low-cost housing and not to damage businesses with another rise in interest rates.

"Sussex Enterprise appreciates the Monetary Policy Committee (MPC) is facing a dilemma in trying to balance growth and stability but they must remember that, above all, businesses need a stable environment to grow and prosper."

CBI director general Digby Jones said businesses would accept the increase as long as it was designed to make sure interest rates peaked at the lowest possible level.

He said: "Consecutive rises do mark a shift from the gradualist, well-signalled MPC policy of the past and will do little to control house prices."

Bill Pike, a director at Lloyds TSB Corporate, was more supportive of the Bank's decision, saying it had to act.

He said: "It's four years since the MPC raised rates in consecutive months but the rise was predictable.

"Safeguarding the economy against excessive inflation remains the top priority and, with rising oil and property prices combining with consumer spending to generate inflationary pressure, the MPC had little option but to act."

Stretched homeowners who have borrowed up to the hilt to get on the property ladder are perhaps more likely to suffer from the rise than businesses.

The move means monthly repayments on a £65,000 home loan will increase to £438.88 from £428.78, based on a new rate of 6.5 per cent.

Friday June 11, 2004