Britain’s manufacturers are expecting to raise prices at the fastest pace in 12 years over the coming months as their costs spiral, a key survey showed today.

In the latest blow to lingering hopes for further cuts in interest rates over the summer, the CBI reported more worrying evidence of rapidly escalating cost and price pressures in industry.

The CBI's May survey showed that 30 per cent more manufacturing businesses expected to raise their selling prices in coming months than planned to cut them, compared to a net figure of plus 25 per cent in April and was the highest such figure since February 1995.

The cost pressures in industry were most intense among makers of intermediate goods, a sector which includes energy and commodity intensive activities, and the CBI blamed the 75 per cent rise in the cost of crude over the past year for stoking inflationary forces. The price of oil reached a new high of $135 a barrel today.

“It is clear from the pricing data in the survey that manufacturers are really feeling the impact and having to pass their increasing costs on,” Ian McCafferty, the CBI’s chief economic adviser, said.

“These rising inflationary pressures make it ever more unlikely that we will see the cuts in interest rates expected by the markets only a few weeks ago.”

The persistence of manufacturers’ attempt to raise prices reflects their struggle to maintain margins at a time when their costs are rising and comes even as a widening economic slowdown weakens demand for their products.

The CBI’s gauge of total orders books in industry remained in negative territory, with a reading of minus 10. This was up from minus 13 in April, which had been the weakest figure since October 2006, but still signalled that orders are falling for a second month in a row.

Manufacturers also reported that they did not now expect any rise in their output over the next three months.

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