Bank rate cut by half a point

The Bank of England has cut the cost of borrowing by half a percentage point, a full day before it was due to make its monthly decision on interest rates.

The announcement came at midday on Wednesday, in response to the exceptional economic conditions which have seen the UK Government put together a multi-billion pound rescue package for the country's banking system.

The move, which drops the Bank rate from 5.0% to 4.5%, was co-ordinated with half-point cuts by both the US Federal Reserve and the European Central Bank.

The news has been widely welcomed by UK business groups.

The chief economist of manufacturers' association EEF called the move "bold and decisive" while the director-general of the British Chambers of Commerce said he was "thrilled".

Meanwhile John Wright, national chairman of the Federation of Small Businesses, said the decision was "very helpful" but warned that the Government must now ensure the banks pass on lower rates to small businesses.

IMAGE Lewis Whyld/PA