Prospects for the UK economy have worsened and the Bank of England must act swiftly if the country is to avoid a marked downturn, says the British Chambers of Commerce (BCC).
The economic downturn will be more prolonged than first thought and businesses face a "difficult and risky climate" over the next year as the credit crunch continues to take its toll, the organisation said.
Its quarterly economic forecast urged th
e Bank and Government to be more proactive in taking measures to lift the economy.
The Bank's Monetary Policy Committee voted last week to keep interest rates on hold at five per cent, but the BCC said the longer it waited to cut rates again, the greater the damage.
David Kern, economic adviser to the BCC, said: "Waiting unduly before easing further would pose unacceptable threats to growth. The longer the MPC waits now, the bigger the danger that the situation would deteriorate and the policy choices would become more difficult and more unpleasant later in the year."
Plunging consumer confidence is set to be the biggest driver in dragging down economic growth, said the BCC, which is forecasting growth in gross domestic product to slip from three per cent in 2007 to 1.7 per cent in 2008 and even one per cent at the turn of the year – a marked shift on its earlier predictions of two per cent in 2009.
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