Tough times ahead for businesses were signalled today as inflation rose to a 17-month high of 3.7 per cent in April driven by rising food costs and Budget duty hikes.

And prospects for the immediate future were not good as petrol prices soared to record levels with VAT expected to be hiked to 20 per cent, said Birmingham Chamber of Commerce and Industry (BCI).

President Paul Bassi said: "We now look ahead to the June 22 Emergency Budget for business-friendly measures that will help us through this tough period. 

"Rising fuel prices will have an adverse impact on most businesses and with VAT widely expected to rise to 20 per cent, trading conditions will get even harder.

"We urge the Bank of England to maintain low interest rates to help businesses cope with the difficult conditions.

"The Bank's Monetary Policy Committee expects inflation to ease. But in the face of these higher-than-expected figures, they must resist the temptation to hike interest rates as a means of preventing the cost of living rising out of control."

The official figures showed average petrol prices hitting 120.2p a litre last month - the highest since records began in 1996 - but the impact on inflation was limited, despite misery for motorists and businesses due to similar rises a year earlier.

Alcohol and cigarette duty hikes in March's Budget added to inflationary pressure, while clothing and footwear prices also rose by more than a year ago.

Food, drink and clothing added a combined 0.3 percentage points to the CPI, the ONS said, offsetting falling furniture costs.