Inflation in Britain is set to rise, placing pressure on the government to increase interest rates, according to a new survey.

More than six out of 10 business leaders questioned said they expected prices to rise in the first quarter of 1998.

This is a jump of 3.5% compared to four months ago.

Analysts Dun & Bradstreet, which compiled the report, said this was a "small but significant rise."

A spokesman said: "The survey shows modest inflationary pressures which could strengthen demands for an increase in interest rates."

Company bosses said exports would remain steady in the next four months, while some service industries, like information technology, were confident about increasing exports.

The most confident sector was construction, where more sales, orders and employment were all predicted. Expectations among building bosses had improved more than any other sector.

Overall employment is not thought to be on the increase.

"This could reflect the fact that many businesses, apart from the construction sector, have already increased their staffing levels and cannot afford to take on more staff," said Dun & Bradstreet.

The picture varied around the country. Scotland and the West Midlands saw the biggest increase in the number of bosses expecting to increase prices.

Prices in Wales and the East Midlands were expected to remain steady.

Companies in London and the South East were the most optimistic of increasing sales and profits, but the West Midlands and the North East showed the biggest improvement in optimism.

The survey polled more than 1,600 company chiefs.
 

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