The stock market has plunged to its lowest level in almost three years as investors take fright at gloomy economic indicators and the Bank of England rejects industry calls for further cuts in interest rates. Driving the market downwards is a meltdown in hi-tech stocks such as Marconi.

Yesterday's decision by the monetary policy committee to reject industry calls for base rate cuts comes against a grim economic backdrop, as manufacturing suffers its worst slowdown since full-blown recession in the early 1990s.

The news triggered alarm on the stock markets and share prices tumbled with £26 billion written of the value of the UK's blue chip companies. The FTSE 100 slumped by 111.7 points or 2.1 per cent and trading closed on 5,204.3 - the city's lowest ebb since October 1998.