According to the latest quarterly survey from the British Chambers of Commerce, exporters are facing their worst summer since 1992 with both manufacturing and service companies feeling the pain.
"With interest rates expected to increase further, our concern is that sterling will continue to strengthen, causing significant damage to the UK's competitiveness, said Ian Peters, the BCC's deputy director-general.
His comments came as four leading companies issued warnings about the strength of the pound. British Steel said that the strength of sterling was putting profit margins under increasing pressure. Sir Brian Moffatt, chairman, criticised the Government for relying on interest rates rather than fiscal policy to curb inflation.
Courtaulds, the chemicals group, blamed the strong pound for its warning yesterday that first-quarter profits were "a little below" those of last year. Sir David Lees, chairman, said the rising pound was having an adverse impact both on trading competitiveness and profit translation.
De La Rue, the banknote printer, added its voice to the debate at its agm. It said the strong pound and margin pressure in banknotes had resulted in first-quarter operating profits falling below those of last year.
Reuters has also been savaged by sterling. Its pre-tax profits for the first half of the year were down 3 per cent to pounds 333m compared with a 12 per cent increase at comparable exchange rates. Analysts estimated that sterling's strength had reduced first-half profits by pounds 50m.
The BCC urged Mr Brown to speed up the introduction of the new individual savings account to encourage consumers to save windfall gains instead of spending them and reduce the pressure for higher interest rates.
But the Trades Union Congress said that the Government could take the pressure off the pound by indicating that it was considering entry to the single currency at a ``realistic and competitive rate of DM2.50''.