LONDON (AFX) - UK firms suffered their worst period of economic activity for over two years last quarter, with the recession closing in on manufacturing and the service sector losing its grip on growth, according to the latest quarterly survey from the British Chambers of Commerce.
It called on the Bank of England to cut rates in August to support economic activity.
The survey, covering 7,751 companies, also found that investment for both sectors is at its slowest for two years. The BCC went on to report that competition remains the main concern for service firms while the exchange rate tops manufacturers' list of concerns.
David Lennan, the BCC's director general said: "The shock waves of the global slowdown are reaching further and deeper into the UK economy than previously expected. With manufacturing confidence draining away, the wings of service sector growth clipped and price pressures on a downward trend, there exists both the scope and the need for a further cut in interest rates in August."

Percentage balance Q2 2001 Q1 Q4 2000
of manufacturers:
With rising domestic sales -1 +11 +15
With rising domestic orders -5 +8 +12
With rising export sales +1 +1 +6
With rising export orders +1 +1 0
Expecting to raise prices +9 +14 +15
Increased workforce -1 +6 +9
Expecting to hire more staff +2 +13 +4
With hiring problems +69 +74 +75
Reporting pay pressures +26 +34 +33
Reporting higher
machinery investment +4 +7 +11
Confident about profits +24 +34 +32
Working at full capacity +37 +36 +36

Percentage balance
of service firms:

With rising domestic sales +26 +31 +35
With rising domestic orders +19 +26 +31
With rising export sales +3 +9 +16
With rising export orders +1 +8 +13
Expecting to raise prices +18 +32 +32
Increased workforce +15 +18 +23
Expecting to hire staff +22 +23 +24
With hiring problems +69 +64 +65
Reporting pay pressures +28 +32 +28
Reporting higher
machinery investment +17 +21 +24
Confident about profits +37 +38 +39
Working at full capacity +36 +39 +39