Don't dither, business chiefs tell Darling

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They spoke out 24 hours after Bank of England governor Mervyn King made clear that the UK could be heading for a recession.

They called on the Chancellor to support the property market after the fiasco over a possible stamp duty "holiday" which has hit house sales.

The Chancellor should be prepared to extend the £50 billion special liquidity scheme for banks and building societies despite reported opposition from Mr King.

Ministers should also press on with major infrastructure schemes for the capital including Tube renewal, phase 2 of the East London Line extension, as well as not delaying the proposed £16 billion Crossrail project.

"The capital is the engine of the UK economy, but it is more prone to peaks and troughs than the rest of the country," said John Dickie, director of strategy and policy at London First.

"Action is needed now to keep the engine running and ensure that it is well-tuned to accelerate when recovery is in sight."

On housing, the business group backed town halls buying out existing mortgages from home owners who could no longer pay their bills.

Share-ownership schemes, particularly for key workers, should be expanded.

The financial chiefs also supported Mr Darling relaxing his borrowing rules, which limit public debt to 40 per cent of GDP.

"Given the limitation on interest rate cuts when prices are increasing, some limited loosening of fiscal policy is justifiable," they stressed.

"These measures cannot wait until the pre-budget report in the autumn."

Britain's competitiveness must also be maintained by improving vital gateways such as Heathrow airport by tackling immigration queues and other problems.