Industry leaders call for rate cut

Industry leaders called for a swingeing half-point interest rate cut today after it emerged export prospects were their bleakest since 1980.

The CBI's latest quarterly industrial trend survey found that 59% of manufacturing firms were less optimistic about exports in the wake of the US terrorist attacks.

Overall, business confidence also fell to a three-year low as 60% of respondents said they were less optimistic about the general business situation.

Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union (AEEU) said: "These hard facts confirm Britain's manufacturing meltdown. The DTI must take this crisis in the engine room of Britain's export economy at least as seriously as the government rightly took foot and mouth."

The CBI cautioned that confidence may have been unduly influenced by recent events, but said some of the figures were still "deeply worrying".

CBI director general Digby Jones believes the recession-hit manufacturing sector needed decisive action from the Bank of England's Monetary Policy Committee next month. Interest rates are already at their lowest level for 37 years at 4.5%.

Mr Jones added: "Business needs decisive and meaningful action to shore up confidence. This means the MPC must cut rates by half a per cent.

"The picture is extremely mixed but many sectors are experiencing the worst conditions since 1991.

"With the inflation outlook benign, there is ample scope for the Bank [of England] to lower rates and the economic situation justifies a half point cut. Indeed, if the Bank was not to cut rates by half a point now it is difficult to think of a situation when it will."

The survey also found that domestic orders are expected to fall at the quickest rate since January 1991.

With export prospects declining at their fastest rate for 21 years, manufacturers said political and economic conditions were acting as a constraint rather than concern over prices.

Ian McCafferty, the CBI's chief economic adviser, warned: "The survey shows the main impact in the UK economy of the US tragedies is being borne by UK exporters.

"As a result, the imbalances in our two-speed economy are likely to worsen over the winter. However, an overall recession is unlikely as the resilience of the consumer sector will continue to provide support."

Firms of all sizes and sectors said they expected numbers employed to fall at a faster rate over the next four months and add to the 125,000 net job losses in the sector during the year to August.