The Bank of England has put up interest rates amid warnings that the move could hit Britain's struggling manufacturing sector.

The monetary policy committee (MPC) announced that rates are to rise by 25 basis points, the first upward move since February 2000.

Analysts now expect rates to rise by around two per cent over the next two years.

The decision comes amid fears that a hike could damage manufacturing companies stills struggling with tough market conditions.

David Frost, director general of the British Chambers of Commerce, said the latest move "should not turn into a trend of rising interest rates".

"The deep-seated forces that have caused prolonged manufacturing weakness in the past few years still pose a threat, and it is vital to ensure that, on this occasion, any upturn in the sector is not blown off course," he cautioned.

Meanwhile, a CBI report found that smaller manufacturers have yet to benefit from the economic recovery.

It said the sector had seen orders fall at the fastest rate for two years.

"Despite the pick up in the global economy and signs of improving optimism across a range of businesses, UK manufacturers have yet to benefit from a solid recovery and smaller manufacturers in particular continue to feel the squeeze," said Digby Jones, CBI director general.

His comments came amid continuing fears over the UK's two-speed economy.

Data published by the Halifax on Tuesday showed that house prices rose by 1.2 per cent in October.

And earlier this week the CBI's retail survey showed growth in high street sales accelerating.

The Liberal Democrats warned that Britons now owe an average £5,330 in unsecured debt, an increase of 50 per cent since 1997.

"The Bank is trying desperately to create a soft landing for the seriously overvalued housing market, while not crushing the hard pressed manufacturing sector," said Lib Dem Treasury spokesman Vince Cable.

"With debt at record levels, this rise looks like the start of a trend rather than a blip and those who have borrowed at the limit of their means could be hit hard."