"If the Bank of England cuts interest rates next week, many will breathe a sigh of relief, " he added.

BBC: NEWS | Business | Mortgage approvals drop further

If, as many economists forecast, the Bank of England cuts short-term rates to 2%, British savers could be tempted by the allure of government bonds yielding 3-4%.

ECONOMIST: Buttonwood

And nearly all analysts now expect the Bank of England to make further sharp cuts in UK interest rates in the new year.

BBC: Bank considered bigger rate cut

In addition to the recent cuts in interest rates, the Bank of England and the government have given the UK's banking sector billions of pounds in loans to try to restore lending levels to normal.

BBC: UK economic slowdown 'worsening'

And the Bank of England is likely to wait and see if earnings growth really has peaked before it cuts interest rates.

ECONOMIST: The economy