Recession 'looming' for UK firms

The UK is facing a serious risk of recession within months, the findings of a survey of almost 5,000 small, medium and large businesses suggest, reported The BBC.

The British Chambers of Commerce's (BCC) quarterly report found the credit crunch and rising costs had dented the most important sectors of the economy.

It comes as falling shares in banks, housebuilders and retailers dragged the FTSE 100 towards a bear market.

Global stock indexes have also fallen amid concerns about the global economy.

Meanwhile housebuilder Persimmon said it had cut 1,100 jobs amid woes in the UK housing market.

The building firm said that completions of house sales in the first six months of the year were down 30%, during what it described as the "most challenging period in our recent history".

Separately, the Council of Mortgage Lenders said that a recovery in the mortgage squeeze was still "some way away" - revealing that the number of loans for home purchases remained low in May at 52,700. Grim outlook

Firms in the manufacturing and services sector said domestic sales and orders had slowed over the past three months, said the BCC, which added that firms were also experiencing serious cash-flow problems. Its economic adviser, David Kern, said the survey showed a "menacing deterioration" in UK prospects.

"We are now facing serious risks of recession," he said.

"The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected."

There are a number of definitions of a recession, but the most commonly used one is when there are two quarters in a row of economic contraction, or negative growth.

Services firms, which include restaurants, gyms and tour operators, have been particularly hard hit, the BCC reported.

Sales and orders, job expectations and confidence in this sector had hit their lowest levels since the recession of the early 1990s.

The BCC's director general David Frost said the report was deeply worrying. "I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country," he said.

"To put more pressure on business would not only restrict business growth and hit the consumer hard, it would crush further what our economy is based on - confidence."