'Serious problems': report seeks rate cuts as slowdown takes hold

Click to follow

Figures from the British Chambers of Commerce to be released on Thursday are set to add to the growing weight of evidence showing a marked slowing of the economy.

The BCC is expected to unveil "serious problems" in the findings of its latest Quarterly Economic Survey for the final three months of last year. It is understood that the report will show a worrying slowdown in the activities of the service and manufacturing sectors, with many firms putting investment and employment growth on hold.

However, the survey will show that firms remain alarmingly confident with their intentions to pass on price increases to customers – a factor that will worry an already reticent Bank of England Monetary Policy Committee. Last week the Bank held interest rates at 5.5 per cent, ignoring pleas for a reduction.

David Kern, economic adviser to the BCC, said: "We know the Bank has little room for manoeuvre and they've only got a number of bullets to fire. But we urge them to act quickly."

The call comes as figures released by accountants Ernst & Young today reveal that profit warnings among quoted British companies climbed to 384 last year – the highest level since 2001.

In the final quarter of last year 107 profit warnings were issued, the highest figure since the last quarter of 2001 and a 22 per cent leap on the same period last year.

Keith McGregor, partner at Ernst & Young, said the jump showed that the contagion in the credit crunch-affected financial sector had spread to the wider economy. "The UK will slow in 2008 – the only question is by how much," he commented.

Among the sectors to suffer most last year were software and computer services and support services, which issued 56 warnings apiece, while general retailing firms posted 47 warnings.

Despite only being two weeks into 2008, the markets have been awash with warnings that have wiped billions off corporate values. So far, the biggest losers have included Land of Leather, Marks & Spencer and DSG, owner of Dixons. The trouble is expected to continue this week: Debenhams and Woolworths are due to release figures and have poin-ted to poor Christmas trading.