AN interest rate cut of a quarter per cent may not be enough to lift the gloom over the North-East manufacturing industry, business leaders said yesterday.

As the Bank of England stood poised to cut interest rates for the first time in a year, businesses said the cut needed to be half a point to restore confidence.

It emerged yesterday that three of the Bank of England's nine-strong Monetary Policy Committee (MPC) had voted to bring rates down to combat the economic gloom.

It comes as concerns are growing about the British economy and tumbling stock markets.

While the MPC opted 6-3 to leave rates unchanged at four per cent, it noted domestic demand was slipping and the outlook was weaker.

The split vote marks the first time in eight months that any MPC member has voted for rates to come down.

Stephen Rankin, regional director of the Confederation of British Industry (CBI) in the North-East, said their quarterly industrial trends survey revealed that business confidence had "sagged considerably".

"What we want to avoid is a situation where interest rates are cut only to be raised relevantly soon afterwards," he said.

"I think if conditions continue to worsen we would like to see a cut of half a point in order to restore confidence."

Interest rates last came down in November a year ago, falling by half a per cent to four per cent and their lowest level for 38 years.

Minutes from this month's meeting two weeks ago showed the MPC was concerned that a "pre-emptive" rate reduction may have re-ignited the consumer boom.

The committee said business spending was low and there were "tentative signs" the housing boom may be cooling.

But Michael Poole, secretary of the North-East branch of the National Association of Estate Agents, said the region's property market was still buoyant.

"I can't see a cut affecting the property market because there is very little likelihood of any interest rates increasing," he said.

"The market is still very buoyant and money is very cheap."

Most members decided to defer judgement until the publication of next month's quarterly inflation report.