Higher energy bills and raw material prices have forced small and medium-size firms to raise their prices sharply, according to a CBI survey.

In the first three months of the year 51 per cent of companies said their costs had risen, while only 7 per cent saw a decrease, the widest margin in more than 20 years.

A fifth of firms said they had raised prices, the most since 1995, while a similar number expected to do so over the next three months.

Despite the weakness of the pound, there was an unexpected fall in export orders, though there was an increase in the number of small firms planning to take on extra staff.

The Bank of England’s inflation report on Wednes­day is expected to show inflation in danger of breaching the Government’s 3 per cent threshold because of high oil and commodity prices.

Worries about the rising cost of living were behind the Bank’s Monetary Policy Committee’s decision last week to leave interest rates on hold at 5 per cent.