Business leaders have joined forces to urge the Bank of England to follow the lead of the US Federal Reserve and cut interest rates when it meets tomorrow.

The Confederation of British Industry and the British Chambers of Commerce urged the Bank to cut rates by a quarter-point from six per cent to 5.75 per cent, as a pre-emptive strike against the impact of a global slowdown.

It is the first time the CBI has called on the Bank to reduce the cost of borrowing since June 1999.

The employers' organisation said it believed the current economic uncertainty could cause firms to put off their investment plans.

Federal Reserve chairman Alan Greenspan sparked a surge in stock markets worldwide last week when he announced a surprise half-point cut in US rates, in a bid to revive a rapidly slowing economy and stave off recession.

Nick Reilly, chairman of the CBI's Economic Affairs Committee and managing director of Vauxhall Motors, said: "The CBI has been arguing for some time the next move should be down.

"Now, after carefully weighing the pros and cons, we believe the time is right for a quarter-point cut.

"There is a need to boost business confidence at a time of economic uncertainty when firms may be hesitating over investment plans.

"Taking pre-emptive action now would support the sectors most at risk from a global slowdown, especially manufacturing and tourism."

The BCC said a quarter-point cut would relieve pressure on manufacturers and send out a signal that the Bank was ready to act to protect the UK from a worldwide downturn.

While the UK is not thought to be in such danger of recession as the US, the Bank's Monetary Policy Committee is expected to consider a cut of its own when it meets. Its decision will be announced on Thursday.

BCC deputy director general Dr Ian Peters today said: "With signs of downturn in the US economy, the Bank of England should reduce interest rates by a quarter percentage point to underpin business confidence and relieve the pressure on UK manufacturers.

"A pre-emptive strike by the Bank would send a clear message to business and the markets that it is ready to act to forestall the knock-on effects of a global slowdown on the UK economy."

"The Bank has room to ease monetary policy as inflation pressures in the UK remain contained by intense competition in domestic and export markets.

"The rise in the sterling-dollar exchange rate has partly offset the pound's recent fall against the euro. Manufacturers continue to be forced to squeeze margins, cut jobs and scale back investment plans in order to compete."

Last month, the Monetary Policy Committee kept the official cost of borrowing unchanged at six per cent, for the tenth successive month.