In its quarterly business trends report, the accountancy firm predicted prices were likely to rise more rapidly next year. It also found business confidence has fallen for the second successive quarter.
But BDO found these negative trends are occurring despite an increase in output, the result of an increase in company and public spending.
BDO urged the Bank of England to ignore concerns about the housing market and cut interest rates by 0.25% when it makes its decision next Thursday. It added the chancellor’s growth targets of 3-3.5% for 2003 would not be met if rates did not drop below 4%.
Partner Peter Hemington said: ‘We think the right thing to do is to cut rates by a quarter point. This is because confidence needs to be encouraged to ensure steady growth in 2003.’
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