The move which was far greater than most expected - hopes had been for up to 1%- seems to underline the dangers ahead for the UK economy.

Last month it cut rates from 5% to 4.5% in an emergency move co-ordinated with other central banks.

There had been widespread calls from industry for a major cut as the country begins to face up to the prospect of a deep recession.

The cut comes after a raft of weak economic data recently.

It is the first time the Bank has cut rates by more than half a percentage point since gaining its independence in 1997.