Captains of industry renew call for rate cut

Industry leaders renewed calls for the Bank of England to cut interest rates at its meeting today as new figures showed manufacturing sliding deeper into recession.

While manufacturing is contracting at its fastest rate since the end of the 1992 recession, five cuts to the costs of borrowing have caused activity in the services sector to rebound. Output rose in March for the first time in five months, according to the Chartered Institute of Purchasing and Supply.

Analysts said the evidence of robust growth among services sector firms could prompt the Bank's Monetary Policy Committee to keep base rates on hold at 5.5 per cent today for the second month in a row. Expectations of no change to the cost of borrowing boosted the pound against other world currencies.

The Engineering Employers' Federation insisted that further cuts were needed 'as a matter of urgency' to offset the impact of the strong pound on industry.

Manufacturing shrunk by 0.1 per cent in March, according to figures released yesterday by the Office for National Statistics. Output fell by 1.1 per cent in the latest three months compared with the same period a year earlier, the sharpest rate of decline since March 1992.

Although the EEF survey suggests that the engineering sector is contracting, the official data shows it is the one part of manufacturing still growing. Textiles and clothing has been hardest hit, with output down nearly 10 per cent year on year.

While engineering has risen by 3.2 per cent over the year, fortunes within the sector are mixed, according to the ONS. Traditional metal-bashing engineering firms are suffering, with output from machinery and equipment firms at a 36-year low, but hi-tech firms are booming.

Output from telephone manufacturers rose by 16 per cent over the last three months, fuelled by strong demand at Christmas for mobile phones.