Interest rate cut to 3%

The Bank of England has cut its interest rate by one-and-a-half percentage points to 3%.

The bank's Monetary Policy Committee slashed rates to the lowest level since 1995 at its meeting on Thursday. It is the first time the bank has cut rates by more half a percentage point since 1997.

The cut follows widespread calls from business groups for a major cut to help boost economic confidence, and has been welcomed by business chiefs.

The national chairman of the Federation of Small Businesses, John Wright, said the cut would increase retail spending in the lead up to Christmas, and that it "amounts to a generous saving for small firms of £750million on loans and overdrafts".

However, he warned that "all this will come to nothing if the banks do not follow through and pass on the rate cuts to those small firms struggling with increased costs of credit".

British Retail Consortium Director-General Stephen Robertson echoed these concerns, saying that a cut of this scale "puts the banks under more pressure to pass the benefits on to borrowers".

"Base rate reductions can't achieve much if they don’t help household finances," he said.