TUC calls for early rate cut to safeguard 80,000 jobs

Manufacturing industry will lose 80,000 jobs this year if interest rates are not cut, according to research to be published this week by the TUC.

The Bank of England's monetary policy committee is expected to keep rates on hold at its meeting on Thursday but the TUC is urging it to cut borrowing costs early in the year to prevent the continued decline of British manufacturing industry. Close to a million jobs have been lost in the sector since Labour came to power in 1997.

The British Chambers of Commerce is also demanding an immediate quarter-point cut to help struggling businesses.

'We believe that business confidence could do with a certain amount of boosting,' said the BCC's economic adviser, David Kern, adding: 'We have had below-trend GDP growth for five quarters in a row.'

Interest rates were cut to 4.5 per cent last August, after a sharp slowdown in consumer spending dragged economic growth to its slowest pace since the recession of the early-1990s.

Ross Walker of Royal Bank of Scotland said early suggestions of a better-than-expected Christmas on the high street, and survey evidence that the services sector rebounded in December, could persuade policymakers to wait and see before administering another cut.

Jonathan Loynes, chief UK economist at Capital Economics, expects at least one more cut in rates, but not yet. 'There's no chance of a move this week, but there is a chance in February,' he said.

One MPC member, Steve Nickell, voted for a cut at the last meeting in December but others said they were concerned about the inflationary impact of surging oil prices feeding through to pay deals in the new year.

The TUC's report, Cut or Bust, dismisses these fears, and questions the Bank's assessment that the economy is running close to capacity. It points to a small rise in the overall unemployment rate at the end of last year. Treasury figures show manufacturing lost 93,000 jobs in the first 10 months of last year.

Analysts expect Britain's economy to pick up marginally in 2006, with growth of about 2 per cent.