A THIRD of North-East companies said they would lay off staff if interest rates rose again, according to a survey out today.

In addition, 77 per cent of companies said they expected future investment plans to be threatened if the Bank of England's rate-setting committee delivers another rise in rates this Thursday.

The figures, released by the North East Chamber of Commerce (NECC), show that two out of three businesses surveyed said they would have to raise prices if that happened.

More than half of the companies also said they expected a significant decrease in sales in the wake of a rise.

Business leaders said the figures would make worrying reading ahead of this week's decision by the Bank of England's rate-setting group, the Monetary Policy Committee, which is widely predicted to be at least a quarter per cent hike.

Andrew Sugden, of the chamber, said: "The NECC warned last month that using interest rates as the sole method to manage inflation was akin to using a sledgehammer to crack a nut.

"Here, we have evidence of the impact that any future increases will have.

"It is totally wrong that the North-East economy should pay the price for over-heating in the South, as we need above-average growth here to catch up with other regions.

"We have experienced substantial growth over recent years, and the Bank must not let that trend be reversed."

He said the NECC had major concerns over levels of personal debt, which had kept the UK housing market active.

Mr Sugden said: "The ratio between average house price and average wage is now nearly ten to one. You have to question if that is sustainable. If it is not, and we see any sudden drop in property values, then the ripples are going to be felt throughout the economy."

Eighty businesses responded to the survey. Of those, 34 per cent said any increase in interest rates would lead to job losses; 34 per cent said their plans would be threatened; 64 per cent said they would have to raise prices and 57 per cent agreed an increase in interest rates would lead to a significant drop in their sales.

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