Bank of England urged to cut rates

The Bank of England was today urged to press ahead with a widely-predicted cut in interest rates after data showed the retail sector remained in the doldrums.

British business body the CBI said July sales in the UK were broadly unchanged from June – when the fall in trading was at its lowest level in the survey’s 22-year history.

However, retailers seemed to be “largely unaffected” by the July 7 terror attacks in London. The CBI also questioned a smaller number of retailers about the attacks as well as carrying out its regular survey, but did give any figures.

The impact of the second attacks on July 21 will not be evident until the August data.

Economist John Butler at HSBC said retail sales remained “weak” but did not deteriorate as much as expected given the lost trading days caused by the events in London.

The CBI said in its monthly Distributive Trades Survey that jitters over the housing market, interest rates and tax increases meant retailers had not seen annual sales rise since the end of last year.

It said 47% of retailers reported their sales volumes fell, compared with 29% who said they were up.

The balance of minus 18% compared with minus 19% in July.

The survey came a day before the Bank of England’s rate-setting Monetary Policy Committee (MPC) holds its monthly meeting. Analysts widely expect it to announce a reduction in the cost of borrowing on Thursday.

CBI director general Digby Jones said: “As the risk of inflation remains low, a timely cut in interest rates by the Monetary Policy Committee on Thursday is essential to maintain growth and consumer confidence.

“The argument for a ‘wait and see’ approach is fading fast. It is time for the Bank of England to get off the fence.”

The survey was carried out between June 29 and July 20.