Further interest rate rises beyond the Bank of England‘s newly-announced 0.25 percentage point increase could start to have a damaging impact on the construction market, sections of the timber industry have warned.

Following the hike to 3.75%, the first rise in four years, Timber Trade Federation head of public affairs Mark O’Brien said any additional increases could be “painful” for business and consumers alike.

He said: “Already with economic growth reliant on public spending there is a danger of two economies developing – one called the private sector and one called the public sector, and interest rises could exacerbate this trend even further.”

Andrew Howarth, chairman of the Howarth Timber Group, said: “If borrowing continues there will be further rate rises and this will have a knock-on effect on the construction industry in the longer term.”

Mr Howarth believes if the rate grows to 5% it will dampen the property market and reduce the amount people are spending on consumer products and home improvement/extensions.

&#8220A sharp rise in interest rates would hit private sector construction, including housing, hard and would damage overall industry growth
”

Allan Wilén, CPA economics director

Richard Lambert, director of the British Woodworking Federation, said: “Obviously, for manufacturers it adds further pressure and while I think we have to make sure inflation does not get out of hand, we have to be careful that we do not overburden people with costs.

“A lot of our members have invested in new machinery and if they have borrowed to invest, then increasing interest rates will raise their cost of borrowing. If rates continue to rise it will probably have an impact on the buoyancy of the construction market.”

The Construction Products Association (CPA) is urging the Bank of England to act with caution.

Allan Wilén, CPA economics director, said: “A sharp rise in interest rates would hit private sector construction, including housing, hard and would damage overall industry growth.”