Gloomy figures from the UK's manufacturing and service sectors have underscored calls for an aggressive cut in the level of interest rates.
Gloomy figures from the UK's manufacturing and service sectors have underscored calls for an aggressive cut in the level of interest rates.
The Bank of England is expected to cut rates from 4.5% on Thursday as it tries to prevent a painful recession.
The Bank of England is expected to cut rates from 4.5% on Thursday as it tries to prevent a painful recession.
Figures released on Wednesday indicated that both the service and manufacturing sectors are continuing to struggle.
Figures released on Wednesday indicated that both the service and manufacturing sectors are continuing to struggle.
Some groups want the Bank to cut rates by one percentage point to 3.5%, which would be the biggest cut since 1993.
Some groups want the Bank to cut rates by one percentage point to 3.5%, which would be the biggest cut since 1993.
The Bank's Monetary Policy Committee begins its two-day meeting on Wednesday and the interest rate decision will be announced at midday GMT on Thursday.
The Bank's Monetary Policy Committee begins its two-day meeting on Wednesday and the interest rate decision will be announced at midday GMT on Thursday.
Prime Minister Gordon Brown called on banks and building societies to pass on any cut in the official interest rate to their customers.
Some lenders have not passed on rate cuts to holders of variable rate mortgages and earlier this week Abbey announced that it was raising rates on some new tracker mortgages.
'Deep recession'
'Deep recession'
Gloomy figures on the manufacturing and the service sectors released on Wednesday indicate that the financial crisis is now hitting home.
Gloomy figures on the manufacturing and the service sectors released on Wednesday indicate that the financial crisis is now hitting home.
We need a real shock to the system that a significant rate cut will provide David Smith, Jaguar Land Rover chief executive
We need a real shock to the system that a significant rate cut will provide David Smith, Jaguar Land Rover chief executive
Activity in the service sector, the backbone of the UK economy, shrank in October for the sixth month in a row and was at its lowest level since 1996, according to an index compiled by the Chartered Institute of Purchase and Supply.
Activity in the service sector, the backbone of the UK economy, shrank in October for the sixth month in a row and was at its lowest level since 1996, according to an index compiled by the Chartered Institute of Purchase and Supply.
Meanwhile, the Office for National Statistics said that manufacturing output fell for a seventh month in September - the longest run of monthly declines since 1980.
Meanwhile, the Office for National Statistics said that manufacturing output fell for a seventh month in September - the longest run of monthly declines since 1980.
Manufacturing output fell by 0.8% in September, much worse than analysts' expectations, making output 2.3% lower than a year earlier, the sharpest decline since May 2003.
Manufacturing output fell by 0.8% in September, much worse than analysts' expectations, making output 2.3% lower than a year earlier, the sharpest decline since May 2003.
Vicky Redwood, UK economist at Capital Economics, said Wednesday's data increased the chance of a one percentage point rate cut.
Vicky Redwood, UK economist at Capital Economics, said Wednesday's data increased the chance of a one percentage point rate cut.
"These figures provide further evidence that the UK is entering a deep recession," she said.
"These figures provide further evidence that the UK is entering a deep recession," she said.
'Calmer waters'
'Calmer waters'
Last month, the Bank cut its base rate from 5% to 4.5% in an emergency co-ordinated move by the world's central banks.
Last month, the Bank cut its base rate from 5% to 4.5% in an emergency co-ordinated move by the world's central banks.
Bank of England rate setters are under pressure to make an aggressive cut.
Bank of England rate setters are under pressure to make an aggressive cut.
PricewaterhouseCoopers (PwC) has called for a cut to 4% on Thursday but says rates will need to fall further.
PricewaterhouseCoopers (PwC) has called for a cut to 4% on Thursday but says rates will need to fall further.
PwC predicts that the UK economy will grow by 1% this year and shrink 0.5% in 2009 before reaching "calmer waters in 2010".
PwC predicts that the UK economy will grow by 1% this year and shrink 0.5% in 2009 before reaching "calmer waters in 2010".
"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," said John Hawksworth, head of macroeconomics at PwC.
"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," said John Hawksworth, head of macroeconomics at PwC.
However, David Smith, the chief executive of Jaguar Land Rover, said a dramatic one percentage point was "absolutely vital" to kick start the economy.
However, David Smith, the chief executive of Jaguar Land Rover, said a dramatic one percentage point was "absolutely vital" to kick start the economy.
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 Stephen Robertson, BRC director general
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 Stephen Robertson, BRC director general
"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," Mr Smith said.
"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," Mr Smith said.
A report from KMPG, based on a poll of recruitment consultants, showed that job vacancies in October fell at the fastest rate in 11 years.
A report from KMPG, based on a poll of recruitment consultants, showed that job vacancies in October fell at the fastest rate in 11 years.
Growing confidence
Growing confidence
Falling food and fuel prices could offer consumers a glimmer of hope.
Falling food and fuel prices could offer consumers a glimmer of hope.
The British Retail Consortium said that shop price inflation stood at 3% in October, down from 3.6% in September and the second consecutive month of falls.
The British Retail Consortium said that shop price inflation stood at 3% in October, down from 3.6% in September and the second consecutive month of falls.
The fall in the inflation rate was mainly due to decline in food prices, it said.
The fall in the inflation rate was mainly due to decline in food prices, it 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," said Stephen Robertson, BRC director general.
"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," said Stephen Robertson, BRC director general.
The Nationwide Building Society said its consumer confidence index showed the first monthly increase in confidence this year.
The Nationwide Building Society said its consumer confidence index showed the first monthly increase in confidence this year.
Consumers were more pessimistic about the current economic climate but had become significantly more optimistic about how the economy would look in six months time, it said.
Consumers were more pessimistic about the current economic climate but had become significantly more optimistic about how the economy would look in six months time, it said.
The index stood at 55 in October, up from 51 a month earlier but it is still much lower than a year ago when it stood at 91.
The index stood at 55 in October, up from 51 a month earlier but it is still much lower than a year ago when it stood at 91.
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Have you been affected by the issues covered in this story? Is the current financial upheaval having an impact on your business or investments? Would you welcome a cut in interest rates? Send us your comments using the form below.
Have you been affected by the issues covered in this story? Is the current financial upheaval having an impact on your business or investments? Would you welcome a cut in interest rates? Send us your comments using the form below.
