The Confederation of British Industry has called for a half-point cut in interest rates to prevent further sharp falls in exports, output and employment.

On Wednesday for the first time in three years the business leaders group made its call as it published the gloomy results of their quarterly trends survey.

The survey is the first to have received responses after the September 11 attacks, and shows business confidence at a three-year low, the worst export expectations since July 1980 and the fastest expected fall in domestic orders since January 1991.

Over the next 12 months, 59 per cent of firms predicted a downturn in export orders, compared with just six per cent expecting an increase. Uncertainty about the general business situation over next quarter plagued 60 per cent of businesses, whereas six per cent remained optimistic.

Director-general of the CBI, Digby Jones, said of the findings: "Business needs decisive and meaningful action to shore up confidence. This means the MPC must cut rates by half a per cent. The picture is extremely mixed but many sectors are experiencing the worst conditions since 1991.

"With the inflation outlook benign, there is ample scope for the Bank to lower rates and the economic situation justifies a half-point cut. Indeed, if the Bank was not to cut rates by half a point now it is difficult to think of a situation when it will."

The report also shows that domestic orders are expected to continue the downward trend by 39 per cent of businesses, compared to 14 per cent expecting an increase.

Ian McCafferty, Chief Economic Advisor at the CBI said: "The survey shows the main impact on the UK economy of the US tragedies is being borne by UK exporters. As a result, the imbalances in our two-speed economy are likely to worsen over the winter. However, an overall recession is unlikely as the resilience of the consumer sector will continue to provide support."