There have been desperate calls for a forceful cut in the level of interest rates as dismal figures from the UK’s manufacturing and service sectors have been uncovered.  A rate cut of 4.5 per cent is expected of the Bank of England on Thursday as it attempts to avert a devastating recession.

Information released on Wednesday showed that service and manufacturing sectors alike are continuing to struggle in the wake of the current economic struggle and some groups are calling for the Bank to cut rates by one per cent point to 3.5 per cent, making it the largest interest rate slash since 1993.

The depressing figures that had been exposed are indicative of the fact that the economic crisis is closer to home than previously thought.  The fortitude of the UK economy, the service sector, has seen a sever drop in activity in October for the sixth consecutive month, and was at its lowest level since 1996, according to an index compiled by the Chartered Institute of Purchase and Supply.

Last month saw the Bank of England cut its base rate from 5 per cent to 4.5 per cent in an urgently co-ordinated attempt by the world’s central banks.  However, this is appearing to be not good enough as PricewaterhouseCoopers (PwC) has called for a cut to 4 per cent on Thursday, stating that rates will still need to drop further.

PwC has forecast that the UK economy will expand by 1 per cent this year yet decrease 0.5 per cent next year before settling down in 2010.  John Hawksworth, head of macroeconomics at PwC has said, “The Bank of England Monetary Policy Committee needs to cut interest rates progressively to 3% or lower in order to prepare the economy for the recovery we hope to see in 2010.”

Dropping fuel and food costs could offer consumers a speck of optimism however.  The British Retail Consortium has said that the shop price inflation stood at 3 per cent in October, which is a sharp drop from 3.6 per cent in September and is the second consecutive month of falls.  According to the British Retail Consortium, the fall in inflation rates was mostly due to a decline in food costs.  BRC director general, Stephen Robertson, said, “With oil and wheat 30% down on a year ago, and the battle on for every pound customers have to spend, retailers are rushing to pass the benefits on,”

David Smith, the chief executive of Jaguar Land Rover, said that a one percent point fall was extremely imperative to kick start the economy, Smith went on to say, “We need a real shock to the system that a significant rate cut will provide. Stimulating demand is crucial to avoid a deep and long recession, and interest rates are the place to start”.

It seems that without a resolve from the Bank of England immediately then our British economy will severely suffer, producing a chain reaction that will affect everyone in Britain.  However, the Nationwide Building Society consumer confidence index shows that consumers, though pessimistic about the current economic outlook, are more optimistic about the economy in six months time.

Bookmark Us
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Google
  • Reddit
  • StumbleUpon
  • TwitThis

Our Random Articles

More Links