A third rise in interest rates in four months will further increase the cost of doing business, warn UK industry leaders.

The Bank of England yesterday responded to the rising cost of living by pushing the interest rate up from 0.5% to 0.75%, putting it at its highest level since March 2020.

It was particularly driven by the soaring price of energy and other inflationary pressures partly caused by the war in Ukraine.

Martin McTague, national chair of the Federation of Small Businesses (FSB), said: “This move will mean higher debt costs for many firms at a moment when soaring overheads are threatening futures.

“The economic consequences of the pandemic are still being felt by small businesses, whose ability to make up for lost time and income has been undermined by a vicious cycle of rising costs.

“A lot of small firms have had no choice but to increase prices in response, but this isn’t always an option, especially in sectors still trying to entice customers back, such as hospitality and tourism, and their suppliers.

“At the same time, consumer confidence has plunged and the cost-of-living squeeze has intensified, with record fuel prices and sky-high utility bills meaning loss of disposable income.

“Small businesses increasingly feel that the Government is indifferent to the cost pressures they face.

“The planned hikes to national insurance and dividend taxation taking effect in a matter of days, alongside an income tax threshold freeze, will, for many, be the final straw.”

He urged the Government to take action to help small businesses in next week’s Spring Statement, including an increase in Employment Allowance and the small business rate relief threshold as well as tackling the impact of “surging” fuel and utility bills.

Andrew Goodacre, CEO of the British Independent Retailers Association (Bira), warned that an increase in borrowing would “further increase the cost of doing business” and be damaging for smaller businesses that borrowed significant amounts during the pandemic.

“We are genuinely concerned by the impact of rising business costs on indie retailers and we are calling on the Chancellor to use his Spring Statement to reduce the growing financial burden being placed on small businesses, starting with the reversal of the proposed rates increase this year.”

The UK Fashion & Textile Association (UKFT) is urging businesses in the clothing and textile industry to contribute their views to the Bank of England’s Monetary Policy Committee (MPC) meeting which sets the bank rate.

“It is important that the BoE has an accurate and up-to-date understanding of the current market conditions, particularly at this crucial time,” the UKFT said.

It is urging business owners to fill in an online survey that aims to find out their outlook for the next six months. The deadline for submissions is 28 March 2022.