Fresh demands for a Bank of England interest rate cut have been made by unions and business leaders amid growing fears of a UK recession.

The TUC and the British Chambers of Commerce (BCC) voiced their concerns ahead of the monthly rates announcement by the Bank`s Monetary Policy Committee (MPC).

The committee is expected to keep rates unchanged at 5% for the fifth successive month because of inflation fears, despite an economy in its worse state for 16 years.

Splits among the Bank's rate-setters have become more public in recent weeks as Professor David Blanchflower called for immediate rate cuts and said his committee colleagues were "misguided" for their focus on inflation.

Inflation is now running at 4.4%, more than double its official 2% target and set to peak at 5% or more in the months ahead.

But recession, not inflation, is the greater danger, said Adam Lent, the TUC's head of economics and social affairs: "With little domestic pressure on prices, the Bank must start to cut interest rates aggressively, or the slowdown will be far worse than it needs to be."

The BCC's economic adviser, David Kern, said: "The MPC will almost certainly keep interest rates on hold on today ... but it cannot ignore the mounting threats of falling UK house prices and worsening pressures on the global banking system. The economy urgently needs an interest rate cut to counter threats of recession."

JP Morgan economist Allan Monks predicts rates will fall in November when inflation risks have subsided. He said: "Although the MPC may be slowly coming round to the idea that rates need to come down, a cut at tomorrow's September policy meeting looks very unlikely."

More evidence of a brewing recession has been given in survey data that showed manufacturing, services and construction activity shrinking in August, despite registering slight improvements from July's lows.

Housebuilding has meanwhile seen steep declines because of the impact of the credit crunch on mortgage availability, while the CBI business group said high street retailers have had a "summer to forget".

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