Business and unions urge Bank to cut rates to boost industry

Business and unions stepped up their campaign for a cut in interest rates next month after the Bank of England yesterday opted to leave monetary policy on hold.

The decision to leave the base rate at 4.0 per cent for the 11th month in a row came as little surprise in the City but was greeted with disappointment on the factory floor.

One manufacturing group, the Engineering Employers' Federation, said the Bank had "missed an ideal opportunity" to deliver a boost to industry.

The Confederation of British Industry urged the Bank's Monetary Policy Committee (MPC) to "remain alive" to the dangers of a slowdown in consumer spending and confidence.

"It needs to be prepared to cut rates if further signs of weakness emerge," said Ian McCafferty, the CBI's chief economic adviser.

Roger Lyons, the joint general secretary of Amicus, the trade union, said: "By doing nothing, the MPC has condemned thousands of manufacturing workers to the dole and has helped keep up the pressure that is committing manufacturing to a slow, lingering death."

Although economists in the City were unanimous in expecting no change yesterday, some believe industry's wishes could be fulfilled as soon as next month. In November, the Bank publishes its quarterly inflation and growth forecasts, which are often used an opportunity to justify a change in monetary policy.

That month will also see a sharp downward revision by the Government of its growth forecasts in the pre-Budget report. On top of that, the US Federal Reserve Board meets a day before the Bank and could launch a round of co-ordinated interest rate cuts.

Yesterday, Paul Boateng, the chief secretary to the Treasury, struck a gloomy note at an investors' conference. "Downside risks and uncertainties remain," he said. "We must maintain our vigilance ... and avoid the twin temptations of undue pessimism on the one hand, and unacceptable complacency on the other."

George Buckley, a UK economist at Deutsche Bank, said there was a strong chance that the Bank, the Fed and the European Central Bank ­ which also kept rates on hold yesterday ­ would all act in the coming months. "We look for the first move from the Bank in either November or December, followed by another cut in the first quarter of next year," he said.