CAPTAINS of industry in the south today urged the Bank of England: "Don't damage business confidence with a series of quick-rate rises."

They fear even a small rise on Thursday from the 48-year low of 3.5 per cent will deliver a double whammy.

The imminent rise - which would be the first in four years - will affect hundreds of thousands of businesses and householders across the south.

Higher rates will mean that homeowners face bigger mortgage bills in the run-up to Christmas.

With personal debt at a record £905 billion nationally, many people will also struggle to meet increased credit card repayments and bank overdraft charges.

There are concerns that stepped up interest rates could lead to a repeat of the 1980s recession, when debts led to negative equity and headline repossessions.

For example, a rise of just 0.25 per cent on a £100,000 repayment mortgage, based on the standard variable rate of 5.54 per cent, would mean an extra £15.06. That would rise to £61.83 in a one per cent hike.

With financial experts predicting an interest rate of 5.5 per cent in 2005, even more debt-laden people would go under.

Manufacturing and exports would also be more costly because a rise would put further upward pressure on uncompetitive sterling.

But it is a racing certainty that Bank of England will raise interest rates by at least a quarter of one per cent because of growing evidence that an economic recovery is gathering pace, and fears that consumer debt is out of control.

CBI chief economic adviser Ian McCafferty said the recent recovery in the wider UK economy is in its early stages and is still fragile.

He added: "The bank needs to ensure that it does not damage business confidence with a series of quick rate rises."

Karen Bladen, spokeswoman for the Federation of Small Businesses in Wessex, warned against a rate rise, saying there isn't "conclusive evidence" of an economic recovery yet.

However, two new economic reports have put new further upward pressure on interest rates.

Monthly retail data from the CBI points to better-than-expected growth on the High Street while the Chartered Institute of Purchasing and Supply (CIPS) said the recovery in manufacturing had stepped up a gear.

The latest monthly CBI Distributive Trades Survey revealed that retail sales last month (oct) rose at their fastest year-on-year rate for 18 months. Manufacturing is growing at its fastest rate for almost four years, according to the Chartered Institute of Purchasing and Supply (CIPS).