The longer the Bank of England takes to cut rates, the worse the economic situation will be, according to the British Chambers of Commerce’s (BCC’s) quarterly economic forecast.
According to the BCC, its report highlights a ‘significant worsening’ in the state of the UK economy which has led to the distinct possibility of negative or zero growth and technical recession.
David Kern, economic adviser to the BCC, says: ‘Our view is that the threats to growth are more serious and more immediate than the risks of higher inflation. The UK economy urgently needs an interest rate cut to counter threats of recession.’
The group advises the government to cut interest rates to 4.75 per cent in the fourth quarter of the year, then to reduce them further to 4.50 per cent in the first quarter of 2009.
Unemployment is likely to increase by more than 250,000 people and could reach as many as 2 million, the BCC predicts.
Figures from the Office for National Statistics released last week found the number of unemployment benefit claimants rose by 20,100 in July – the largest monthly increase since December 1992.
