Rate rises starting to hurt small companies

The Bank of England's attempts to cool the economy is hampering the recovery of smaller manufacturers, according to a survey published today. Orders taken by small and medium-sized enterprises fell in the latest quarter, halting the nascent turnaround, the CBI said.

The Bank of England's attempts to cool the economy is hampering the recovery of smaller manufacturers, according to a survey published today. Orders taken by small and medium-sized enterprises fell in the latest quarter, halting the nascent turnaround, the CBI said.

Export orders fared worst, with the overall volume sliding 6 per cent during the period on the back of weaker demand from countries such as the US. Optimism among SMEs was unchanged from the previous three months, when it soared at its fastest rate for two years.

The CBI blamed the pause in growth on the initial impact of higher interest rates. The Bank's MPC has raised the base rate 125 basis points to 4.75 per cent since November.

Hugh Morgan Williams, the chairman of the CBI's SME council, said: "The peak in interest rates should not be much higher than the current level. It is especially important to smaller manufacturers that the Bank does not apply the economic brakes too hard as the sector is more vulnerable than most."

Total orders fell during the period, with 33 per cent of companies saying new orders were down.