British Chambers of Commerce demands cuts in interest rates and business taxes as confidence collapses

The UK is already in recession, with a collapse in confidence across all industries and unemployment set to soar over the next year, the British Chambers of Commerce said today.

Publishing its survey of 5,000 firms, the body said it is clear that the country is in a “worsening” recession and urged the Bank of England and government to take immediate action.

It said the bank should cut interest rates by 0.5% and called on the government to lower business taxes.

The report also warned that unemployment could rise by as much as 350,000 in the next year or two, taking the overall figure above 2 million.

David Kern, economic adviser to the British Chambers of Commerce, said: “The alarming results point to worsening dangers of major economic downturn and rising unemployment. The results support the view that a UK recession has started and the downturn is getting worse. The domestic economy is under immense pressure.

“The mounting global banking crisis reinforces our view that immediate threats to growth are more critical than dangers of higher inflation. Without forceful and urgent corrective action, there is a serious danger that the recession will deepen and cause huge damage.”

The news came as European markets showed signs of rallying after Monday's losses.

London's FTSE 100 rose by 2% in early trading and France's leading shares moved 3.9% higher.

However, Asian markets remained unsteady, with Japan's Nikkei index closing 3% down.