CBI Urges Bank Of England 50 Bps Rate Cut "Soon"

LONDON --The Confederation of British Industry reiterated its call Friday for a 50-basis-point rate cut from the Bank of England "soon," following data showing the U.K. economy contracted 0.5% in the third quarter.

"Business needs a further 0.5 percentage point cut in interest rates soon. Other policy initiatives also need to be urgently considered. Any plans that add to the cost of employment must be delayed to protect jobs," the CBI said in a statement.

The next Monetary Policy Committee meeting is planned for Nov. 5-6.

Speaking on Sky News, CBI Director-General Richard Lambert said the U.K.'s labor market flexibility could help it avoid the "massive layoffs" seen in previous downturns.

Firms and workers can "adapt more readily to changing circumstances...The prime mission now is to protect jobs," he said.

Lambert also seemed to welcome the sharp drop in the pound, which plummeted to a fresh five-year low against the dollar Friday.

He said the pound has been "overvalued" for the last dozen years but no longer looks so. That would eventually help exporters.

"I think that exporters will be a source for part of the recovery when it comes," he said.

-By Laurence Norman, Dow Jones Newswires; 44-207-842-9270; laurence.norman@dowjones.com