INTEREST CUT WON'T STOP THE JOB ROT

THE Bank Of England should have cut interest rates by half a per cent, not by a quarter. That would have given the economy a boost. Instead, unemployment will rise and we could see the problems in the manufacturing sector spreading.

Next in line will be businesses that supply manufacturing companies - retailing is already dropping off with large groups like Marks & Spencer reporting bad figures. However, a recession is more than one or two sectors being hard hit. It's a general tailing off in demand. There is also a danger of over-reaction. Job losses, such as those in the manufacturing sector in the North East, are high profile and may make the UK economy seem worse than it is. The creation of many new jobs in the service sector or in small businesses is often overlooked.

Overall, employment in the UK has continued to rise while unemployment has continued to fall. The rate cut was prompted by the Bank's desire to take some heat out of the economy.

But the economic conditions we are seeing now are not simply the consequence of our domestic interest rate. Global economic problems also have an effect.

I believe we are heading for what will feel like a recession. Yet it won't be a recession in its true definition of falling levels of output. Instead, we will experience a small amount of output growth - three quarters of a per cent next year.

If there is a recession, global economic problems will be the cause, not UK interest rates."

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