Business leaders across the Midlands have called on the Bank of England to ride to the aid of manufacturing industry and slash interest rates by more than a quarter percentage point.

With the monetary policy committee due to begin its deliberations tomorrow many in the region said the widely forecast quarter percentage point drop could be "too little too late".

Birmingham Chamber of Commerce and Industry and the Engineering Employers Federation called for the cut as new figures confirmed the decline of manufacturing.

Industry contracted further last month in the face of a fall in new orders, jobs and stocks in the sector, according to the manufacturing Purchasing Managers Index from the Chartered Institute of Purchasing & Supply.

The CIPS' barometer of all activity in the sector showed a deterioration to 49.2 last month from 49.6 in June.

July was the fourth consecutive month the manufacturing index stayed below 50, which represents a decline.

The CIPS said the level of new orders fell for the third time in the past four months in July after recovering slightly in June, reflecting weaker demand from domestic clients.

The seasonally adjusted Employment Index showed a reading of 46.6, signalling the sharpest rate net workforce reduction for more than two years, due to ongoing costcutting programmes.

Output prices fell at the sharpest rate in two years as companies faced strong competition from lower cost foreign producers.

BCI policy executive Charlotte Ritchie said: " Manufacturing industry declined further in July with new orders, jobs and stocks all falling.

"This puts further pressure on the Bank to reduce interest rates. Forecasters are predicting a quarter of one per cent, but we fear that will not now be enough.

"We believe the case for reduction is clear cut and without it there would be adverse reactions not only from the financial markets but industry and consumers alike."

Peter Mathews, president of the Midlands World Trade Forum, urged the MPC to be

more robust. He said: "A quarter per cent cut will be too little, too late. We understand what the Bank is trying to do and do not want to sound like whingers but they really do need to become more robust in their approach. Interest rates in America are 1.5 per cent lower and the euro is

2.75 lower. British exporters cannot remain competitive in these trading conditions and given the rising cost of raw materials we cannot hope to be competitive."

The EEF said a cut was needed to boost growth and shore up business confidence.

Chief executive Ian Smith said: "The Bank has been right to ignore premature calls for a cut in rates which might not have been sustained.

"However, on balance we believe it should move now to shore up business and consumer confidence. A cut would be a big psychological boost for companies."

Louise Beard, chief executive of Coventry and Warwickshire Chamber, added: "Our members continue to battle against stiff international competition and high raw material and fuel costs. "