The Bank of England was accused of giving "too little too late" after slashing interest rates in a move which shocked the City.

The cut brings interest rates down to 3.75 per cent, the lowest since February 1955, and is the first time the Bank has moved rates in 14 months.

Steven Gauge, from Sussex Enterprise, said, "This interest rate cut is too little too late for many manufacturers in Sussex.

"We have been calling for a cut since November.

Finally the Bank has woken up to what is happening to manufacturing and decided to act.

"In the past three months manufacturing output has been falling while the Bank has been sitting on its hands.

"Engineering output has fallen by as much as five per cent. Businesses need lower interest rates so they can borrow to invest in improving productivity."

The Bank said the decision was made amid weaker prospects for global and domestic demand and said it was necessary to cut rates in order to keep inflation on track.

The move came amid increasing fears about the economy. The stock market has taken a battering, with the FT-SE 100 Index falling to seven-and-a-half year lows, having a knockon effect on investors' bonuses and pension pots.

Manufacturing continues to struggle with weak global demand while surveys have shown the service sector is also slowing.

Economists are concerned about below-trend economic growth, the effects from a potential Iraqi war and that consumer spending could slow.

There are also worries about the housing market, which remains strong with prices increasing by 1.5 per cent in January.

Analysts fear the cut could fuel prices further, making the chances of a sharp drop more likely.

John Butler, UK economist at HSBC, said: "This is one of the biggest gambles any central bank has done - cutting rates when house price inflation is close to 30 per cent and inflation is already above the target.

"It is being a global player and taking their eye off the domestic economy. This could have terrible consequences for the UK."