Manufacturers in the West Midlands have supported the latest decision by the Bank of England to keep interest rates on hold, although it is likely to maintain the sector’s tough trading conditions.

Employers federation EEF West Midlands said it believed it was right to maintain a cautious approach in balancing the slowing economy and problems in the financial and housing markets, with the mounting inflationary pressures.

EEF West Midlands is the largest employers’ association in the region, representing primarily engineering, manufacturing and technology-based organisations.

The federation’s head of representation in the West Midlands, Peter O’Grady, said: “Given the current extent of inflationary pressures, the Bank faces an unenviable dilemma in balancing further signs of weakness with growing concerns over inflation.

“Unless it becomes clear that the economy is deteriorating sharply, the Bank is right to continue its cautious approach.”

The Bank’s policymakers have been given a fresh inflation headache this month with news that factory gate prices surged at their fastest rate for more than 20 years during May.

Soaring petrol, scrap metal and food costs caused a 1.6 per cent rise in prices month on month - the biggest increase since March 1981, according to the Office for National Statistics (ONS).

Prices rose 8.9 per cent in the year to May - far worse than expected by most experts and the biggest annual increase since March 1982.

The data gives the those on the Bank’s rate-setting Monetary Policy Committee little scope to aid the economy by lowering borrowing costs.

Global Insight’s chief UK and European economist Howard Archer described the data as “absolutely appalling”.

He added: “(The figures) further constrain the Bank’s ability to deliver the interest rate cuts that the economy so badly needs.”

One piece of good news for the sector has been the announcement of increased output in April, with especially strong showings in the key aerospace and automotive industries.