The growth of the UK's economy will slow dramatically during 2008, even if the Bank of England takes the plunge and cuts interest rates, an influential business group claims.

The British Chambers of Commerce said its central forecast, based on two 0.25% rate cuts by next summer, indicates gross domestic product growth of 1.9% in 2008, compared with the 3.1% it has predicted for this year.

But it is warning there is a chance that the slowdown could be even more pronounced, especially if the Bank's Monetary Policy Committee does not reduce the cost of borrowing in the next few months.

BCC economic adviser David Kern said the UK economy is now in even greater danger of grinding to a halt.

He added: "UK prospects have worsened considerably as a result of the global credit crisis and the threats facing the international banking systems."

He said the slowdown will be driven by the damaging effects of the current crisis in credit markets, and the cumulative impact of five interest rate rises seen since August last year.

And while UK business has been able to ride out the turmoil so far, easier credit conditions are needed to avoid a nasty reversal of fortunes, he added.

The BCC said year-on-year GDP growth may fall to as little as 1.6% in the third quarter of 2008, compared with 3.3% in the same period this year.

Mr Kern added: "Moderate cuts in UK interest rates would not pose serious risks to inflation, but waiting unduly before easing policy would worsen considerably threats to growth. The immediate priority is to limit the risk of a major downturn."

The MPC voted to hold rates 5.75% for a fourth month in a row at its November meeting. However, economists believe the decision was a close call as recent figures on house prices and business confidence have seen fears raised over the country's financial health.

More clues about the timing of any rate cut will come later when the Bank publishes its quarterly economic report and October's inflation numbers are revealed.

Copyright © PA Business 2007