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U.K. recession looms
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October 19, 1998: 7:41 a.m. ET
Surveys: Profits falling while business failures are on the rise
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LONDON (CNNfn) - Britain is teetering on the brink of recession, according to a raft of surveys released Monday which reveal plummeting profits, falling exports and a steep rise in the number of firms going under.
The news will add to the already mounting pressure on the Bank of England's Monetary Policy Committee (MPC) to follow the U.S. Federal Reserve's lead and cut interest rates again.
The number of UK companies going into receivership jumped by 14 percent in the three months ending in September compared to the previous quarter, according to figures collected by KPMG. The number was up 37 to 300.
Over the same period, 86 public companies reported profit warnings, up from 75 the previous quarter, according to another survey by Ernst & Young.
More than a third of the companies blamed flat or declining domestic markets, exacerbated by high interest rates, while 26 percent said the Asian crisis was having an impact, Ernst & Young said.
Hopes for increased exports are now at their lowest level in a decade, according to the latest quarterly report from business consultants Dun & Bradstreet.
The survey, which was carried out before the MPC cut interest rates earlier this month, said confidence across the economy fell sharply in the third quarter.
Standard Chartered Bank treasury economist Claudio Piron said he expected the MPC to cut interest rates at their next meeting and while it might limit the effect of a recession it was unlikely to prevent one.
'The bottom line is that it looks like at the next MPC meeting in November we are going to get a cut of 25 basis points," he said. 'The likelihood is we will get a technical recession but not like the full-blown recession of the early 1990s."
The MPC is scheduled to meet again on November 4th.
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