MANUFACTURERS saw raw material costs surge by 2.5 per cent last month, their fastest pace in nine months, as crude oil prices hit record highs.

Figures released by the Office for National Statistics yesterday showed that crude oil prices rose 10.6 per cent between March and April and were 45 per cent higher than they were last year.

Meanwhile, imported metal prices rose by 4.4 per cent in the month to April, the highest monthly rise since March 2004.

Total input costs for the year to last month rose by 15.7 per cent, higher than the expected 14.3 per cent increase.

Alan Hall, regional director of the Engineering Employers' Federation, said: "There has been a huge price surge in the cost of base materials, particularly over the past two months.

"The thing concerning manufacturers is that the use of hedge funds is becoming more and more common. Hedge fund resources around the world's markets are huge and cause massive price distortions."

Yesterday's statistics also showed that core output prices rose by 0.4 per cent on the month and by 2.2 per cent on the year - their fastest pace in nine months.

Mr Hall said: "Manufacturers have been feeling the squeeze and are trying to get some ease from the customers where possible.

"A lot of people feel that the market is at its peak and that the prices will fall from these high levels. By the summer, some of the pressures of these prices will have died down because they are being artificially pushed up."

* The latest Confederation of British Industry trends survey found that business confidence in the North-East had improved for the first time since the middle of 2004.

In the past three months, exports have increased, against little change across the UK as a whole, and total orders have risen, ending two years of sustained falls.

A further steep rise in total orders and export orders is expected over the next three months.