The Bank of England monetary policy committee (MPC) must cut interest rates in the near future or firms will go out of business, it has been claimed.

According to David Kern, the British Chambers of Commerce's economic adviser, while today's decision to keep rates on hold is not unreasonable, action must be taken soon.

Mr Kern said: "The MPC cannot ignore the fact that the economic situation, as highlighted in our latest quarterly survey, has deteriorated at an alarming pace. Business confidence has plunged to historically low levels and countering the risk of recession must be an overriding priority."

However, balancing the threat of inflation is also another worry and for this reason the BCC only wants to see a small cut in interest rates in the autumn, he added.

Yesterday, the Federation of Small Businesses called on the government to support small, local, firms as the economic downturn worsens.

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