THE Bank of England yesterday finally bowed to the clamour to insulate Britain from the effects of the rapid economic slowdown in the United States, shaving a quarter-point off interest rates.

The decision by the Bank's Monetary Policy Committee to reduce the official cost of borrowing from 6 per cent to 5.75 per cent was broadly welcomed by industry and unions.

Millions of homeowners also benefited with leading high street mortgage lenders, including the Halifax, Abbey National, HSBC, Virgin and Northern Rock all announcing similar reductions in their rates.

The cut - the first for 20 months - was broadly welcomed by the North-East's business community.

Angus Hynd, assistant regional director of the CBI, said: "This is good news and hopefully will bring some relief to manufacturers in the North-East."

Michael Bird, chief executive of the North East Chamber of Commerce, said: "This is the right decision and it is about time with inflation well under control and the economy performing in line with government targets.

"It will certainly send a positive message to businesses planning investment for growth."

The Northern Association of the Engineering Employers Federation also hailed the cut as a timely boost.

But it warned that unnecessary tax cuts in next month's budget could "muddy the water" and fuel consumer spending.

Northern Rock was among the first of the banks to react to the Bank of England move by cutting its standard variable rate by 0.29 per cent to 7.5 per cent with immediate effect for new applicants, and from March 3 for existing borrowers.

Ron Stout, of Northern Rock, said: "Any reduction is good news for our customers, but on the other hand we need now to review our saving rates."

The rate cut comes only a month before the Chancellor's expected pre-election Budget