Small businesses have 'suffered enough already' and need reassurance that interest rates won't rise as inflation fears mount.

Sam Holliday, development manager of the Federation of Small Businesses for Gloucestershire, said: "Although it is obviously very encouraging to see a genuine bounce back in consumer demand, the news that this is already leading to inflationary pressures will be a concern to many businesses in Gloucestershire and beyond.

"At a time when SMEs need to watch every penny as they embark on their fight back, the fact that they will have to pay more for goods and then in turn possibly have to charge their loyal customers more as well will obviously be a great concern. It will feel like just another unwanted issue to deal with as the direct result of the pandemic and the post-pandemic environment.

"We must just hope that the Government is alert to this and will be sensible in trying to counteract the situation. We hope they will bear in mind that small businesses have suffered enough already and in order to be part of the long-term recovery they should not have to worry that a rise in demand will lead to a rise in interest rates when they have so many other financial issues to deal with."

Consumer price inflation hit 2.1% in May as the economy grew following the easing of Government lockdown restrictions.

The IHS Markit/CIPS price survey reported that there are strong indications that consumer price inflation has 'much further to rise'.

It said that increasingly widespread supply shortages contributed to a further steep rise in manufacturing prices during June, which preliminary data suggested rose at the fastest rate ever recorded by the survey.

It stated: "Average supplier lead-times showed a near-record lengthening, leaving purchasing managers in factories facing a record increase in raw material prices as a result of the developing sellers' market for a wide variety of inputs.

"These higher costs were often passed on to customers, resulting in an unprecedented increase in average selling prices for goods leaving factories."

However, it was not just manufacturing prices that broke new records: average prices charged for services also posted a record increase.