Scots business leaders united in call for dramatic cut in interest rates

SCOTTISH business leaders last night added their voices to the cacophony of demands for a dramatic cut in interest rates to prevent the economy plunging into a full-scale depression.

The "big four" groups which speak for business north of the Border called for a half percentage point cut from the Bank of England's monetary policy committee (MPC) which begins its monthly rate setting meeting today.

The demands from CBI Scotland, the Scottish Chambers of Commerce, the Scottish Council for Development and Industry (SCDI) and the Federation of Small Businesses added to the pressure being heaped on the MPC last night.

Forecasting body the Centre for Economics and Business Research (CEBR) yesterday called on the MPC to follow in the footsteps of the Australian central bank and cut base rates by 1 per cent.

The CEBR said the move should be unveiled today rather than waiting until tomorrow, when the announcement is scheduled to be made.

The MPC has held rates at 5 per cent since April because of inflation fears but the unprecedented chaos in financial markets has sent shock waves through the banking system and threatens to tip the UK into a deep recession.

Business leaders in Scotland yesterday warned that fears over inflation should be put aside to give the economy a much-needed boost.

CBI Scotland assistant director David Lonsdale said: "A cut in interest rates this week is what the CBI is lobbying for, and would bolster confidence and spending power amongst businesses and consumers.

"The Bank should be ready to act in future should further cuts be necessary."

Niall Stuart, spokesman for the SCDI, said: "It becomes clearer every day that the wider economy is suffering as a result of the credit crunch and any worries regarding remaining inflationary pressures are now outweighed by the risk of further economic slowdown."

He added: "The slowdown has been caused by the tightening of credit markets, and an interest rate cut is an essential first step to easing the cost of borrowing and investment.

"A cut of half a per cent is now necessary to getting the economy moving again in the medium-term."

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: "What we desperately need is something to kick-start the economy. We sincerely hope that the more hawkish of the MPC members can see the value of making an investment in the country's future at this time."

Colin Borland, public affairs manager at FSB Scotland, added: "We need to get the banks lending to each other again and get some movement in the markets."