Pressure mounts for 1% rate cut

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Experts said the case was growing for a 1% cut - the largest single move since January 1993 - amid deepening gloom in the key services and manufacturing sectors.

The Bank's Monetary Policy Committee (MPC) began its two-day rates meeting as figures showed that service sector activity shrank at its fastest pace for at least 12 years last month.

The latest survey data from the Chartered Institute of Purchasing and Supply (CIPS) showed its business activity index fell to 42.4 in October, which is the lowest level since the poll began in 1996.

And the Office for National Statistics said manufacturers saw a much bigger than expected fall in activity in September as the sector's worst decline for nearly 28 years continued apace.

The official data showed an 0.8% fall in September, bringing the quarter-on-quarter decline to 1.3% in the three months to September.

Business leaders are calling for a full 1% cut from the MPC when it delivers its decision tomorrow.

CBI deputy director-general John Cridland said: "We have talked to businesses of all shapes and sizes across the UK, and the need for a further rate cut is clear.

"The recession into 2009 will be both longer and deeper than expected, and we need the strong medicine of a full percentage point cut."

The MPC cut rates by 0.5% at the beginning of October in a co-ordinated emergency move by central banks around the world to head off the banking crisis. But official figures since then have shown the alarming pace at which the economy is sliding into recession.