The British Chambers of Commerce announces fears of a slow down in the UK economy next year - even if the Bank of England cuts interest rates to 5.25 percent.
The BCC said its central forecast, based on two 0.25 percent rate cuts by next summer, pointed to gross domestic product (GDP) growth of 1.9 percent in 2008, compared with the 3.1 percent it has predicted for this year.
Interest rate cut
However, it said there was a risk that the UK slowdown could be even sharper, particularly if the Bank's monetary policy committee (MPC) did not cut interest rates in the next few months.
David Kern, economic adviser to the BCC, said the dangers facing the UK economy were now much bigger. He added: "UK prospects have worsened considerably as a result of the global credit crisis and the threats facing the international banking systems."
He said the slowdown will be mainly driven by the damaging effects of the credit crisis, and cumulative impact of five interest rate rises since August of last year.
And while UK business has been resilient so far, easier credit conditions are needed to avoid a nasty reversal of fortunes, he added.
The BCC said year-on-year GDP growth could dip as low as 1.6 percent in the third quarter of 2008, compared with 3.3 percent for the same period this year.
Mr Kern added: "Moderate cuts in UK interest rates would not pose serious risks to inflation, but waiting unduly before easing policy would worsen considerably threats to growth. The immediate priority is to limit the risk of a major downturn."
The Bank of England kept rates at 5.75 percent for a fourth month in a row last week. However, analysts said the committee's decision would have been a close call, given recent negative economic indicators and further turmoil in financial markets.
Fresh clues about the timing of any rate cut will come this week when the Bank publishes its quarterly economic report and October's inflation numbers are released.
November 12, 2007