Business leaders in the West Midlands unanimously welcomed the emergency half percentage point cut in interest rates although reaction further afield was muted.
The cut in base rate from five per cent to 4.5 per cent came 24 hours ahead of the expected announcement from the Bank of England, whose rate-setting monetary police committee began its monthly two-day meeting on Wednesday.
It was part of a co-ordinated move across the world to try to prevent the banking crisis from turning into a major global recession.
It followed quickly on from the Government’s pledge to pump £50 billion into the UK’s ailing banking system in an effort to free up liquidity and restore confidence following the global turmoil of recent weeks.
Speaking for companies at the coal face of the British economy, manufacturers, Peter O’Grady, West Midland spokesman for the EEF said his members would welcome “this bold and decisive move to arrest the current crisis and collapse in confidence”.
He went on to say: “Coupled with the plan to shore up the financial system the co-ordinated moves should help arrest the potential slide into depression.”
Over at the Black Country Chamber, president Peter Mathews said: “I made the point earlier this week that the MPC and the Government needed to make a bold move and they have delivered.
“Businesses will be feeling more confident.
“To see all the world’s major industrial nations come together at the same time to make such a dramatic cut shows just how serious a situation we are in and I am pleased they are all working together for the greater good of the global economy.”
However, “one single rate cut and one example of unified action isn’t enough”, Mr Mathews went on to warn.
“We want to see this co-operation continue over the coming weeks and months and ideally another rate cut before the New Year,” he said.
“At 4.5 per cent, UK rates are still higher than those in the US and Europe, which still leaves Britain at a disadvantage.”
Companies faced with reduced access to capital and higher borrowing costs would heave a sigh of relief at events, said John Phillips, West Midlands regional director of the Institute of Directors.
“Before this announcement the financial system was in the deep freeze. After today it might be in the fridge, but there is no guarantee,” Mr Phillips said. “Nobody should be under any illusion that the financial system is fixed. Our concern is for the real economy and how much it will slow in response to recent events.
“The financial crisis has intensified so much over the past week that a full one percentage point reduction in interest rates is required.
“Widening interest rate spreads and falling commodity prices mean that we don’t think this would take a risk with inflation.”
PricewaterhouseCoopers’ Midland regional chairman, Mark Smith, said the rate cut probably came too late to avoid a technical recession in the UK. But he said they should help to prevent the “deeper and more prolonged” downturn in the economy that was becoming a real risk.
“This is good news for the regional economy,” Mr Smith added.
Ronnie Bowker, senior partner at Ernst & Young in Birmingham, also welcomed the cut in base rate but added: “Until the money market starts operating in a more normal manner, consumers and businesses are unlikely to see the full benefit.
“The next few days will be critical in determining whether the combination of government measures has the desire outcome.”
Away from the West Midlands, the UK’s manufacturing heartland, the response was far less positive.
Daniel Lee of property search engine Globrix, for example, said while it was welcome, it is going to take more than a “token” rate cut to help the bombed out property market.
“In the short term, it may give homeowners a timely boost after a summer of unprecedented misery but could be short lived if the banks fail to pass the rate cuts to their customers.
“I still believe the worst is yet to come,” Mr Lee said.