Whilst the 1% increase in August 2006, was deemed necessary to curb spending and inflation, David Kern, economic adviser for the British Chamber of Commerce warned that a further increase could have a negative effect on SMEs.

"We acknowledge that there is a distinct possibility that UK Bank Rate may rise to 5.75 per cent in June. But we urge the MPC to adopt a cautious and gradual approach," Mr Kern explained.

"We strongly urge the MPC to keep rates on hold next week. Given the acute pressures facing UK businesses, the MPC should allow more time for previous bank rate increases to have their effect on the economy, before tightening further."

"There is a distinct danger that ratcheting up interest rates would worsen unnecessarily the pain facing UK businesses, at a time when inflation is set to fall sharply, and the pace of economic activity is set to slow."