Sharp rises in the cost of oil, gas, electricity and petrol are undermining the business sector at a time when economic growth has slowed, according to the Small Firms Association (SFA).

SFA director Pat Delaney said "crippling" increases would undermine economic stability and add to inflation. He pointed to the 4 per cent year-on-year decline in manufacturing activity in the first half of the year - the first such fall in 23 years.

Current increases in the price of energy and fuel were inflationary as they directly affected the price of raw materials and finished goods, Mr Delaney said. "These increases will have to be passed on to consumers by way of higher prices for goods."

They would also directly affect the consumer price index, "which in turn sets the mindset for wage deliberation", Mr Delaney said.

The SFA maintains that the Commission for Energy Regulation has "a case to answer" after sanctioning direct price increases of 41 per cent in the sector since 2001.

Mr Delaney described the increases as "unwarranted, unnecessary and very unwelcome".

Suggesting that a business-friendly energy policy was a key ingredient for successful economic growth, Mr Delaney said the cumulative increase in prices since 2001 was "in excess of 50 per cent for high energy users".

"This is totally unacceptable for the exposed sectors of the economy trading on the international markets."