The Government was accused last night of losing control of the economy as the stock market plunged into freefall.
And the Midlands' fragile manufacturing sector was warned to brace for further casualties with the UK expected to follow Europe's lead and raise interest rates next month.
Aggressive selling in London yesterday saw #35.3 billion wiped off the value of blue chip stocks and left the FTSE 100 Index 143.4 points lower at 5562.9 - well below last month's five-year high of 6132.
The FTSE 250 Index, which has lost a tenth of its value in the last month, was also hit sharply by yesterday's sell-off, falling nearly 300 points. It closed the day towards the 8800 mark - more than 1,300 points below its all time high early last month.
The carnage was mirrored around the world after the European Central Bank (ECB) joined policy makers in Denmark, Turkey, India, South Korea and South Africa when it raised interest rates to curb spiralling inflation.
Although the Bank of England pegged the cost of borrowing at 4.5 per cent for the tenth month in a row, economists said they expected the next move to be up.
John James, chairman of the Institute of Directors West Midlands, said: "I think we have to be worried. The economy is in such a state of uncertainty at the moment that probably the Government has last control of the economic levers. There is a concern that there isn't the calm hand on the tiller.
"The world economy is in disarray, particularly the US economy, which is driving all these changes. They have a huge amount of personal debt and it is no longer an economy which can sustain itself with energy resources.
"A lot of people are very nervous. No one really knows which way it is going to go. If interest rates rise, it is going to hit our very fragile manufacturing economy."
John Lamb, from the Birmingham Chamber of Commerce and Industry, said a sustained rates rise could result in more companies leaving Britain.
He said: "Foreign companies are already closing in the region, such as Peugeot and HP sauce. Manufacturing is already suffering and if rates rise it will really be in the doldrums."
Latest manufacturing output figures released yesterday showed they contracted by 0.2 per cent in April - the biggest slide since last October. Cinema chain Cineworld - which has a complex at Birmingham's Broad Street - became the latest victim of the stock market when it abandoned its proposed #450 million summer listing.
Cineworld said it decided to postpone the flotation "as a result of the current levels of volatility in the stock market".
The rising interest rates also weakened demand for commodities such as copper and gold, which led to falling metal prices and heavy selling of mining stocks in London.
And oil prices also drifted lower as geopolitical tensions eased following the death of al Qaida leader Abu Musab alZarqawi in Iraq.