SCOTTISH Chambers of Commerce has declared it is "absolutely crucial" for business and the economy that UK base rates remain at their 0.5 per cent record low for now, flagging a danger of deflation.

The comments from Scottish Chambers chief executive Liz Cameron followed figures yesterday from the Office for National Statistics showing that annual UK consumer prices index inflation tumbled from 1.3 per cent in October to a 12-year low of one per cent in November.

Ms Cameron said: "It is absolutely crucial for business and the economy that interest rates are not increased, particularly given the risk of deflation. Entering a period of deflation would be detrimental to the UK economy, potentially reducing consumer spending at a time when economic recovery is still in its early stages."

She viewed the fall in inflation as evidence of "an increasingly competitive business environment where businesses compete on price, with consumers looking for the best value possible while household incomes are squeezed".

Ms Cameron added: "The...announcement in November that inflation in the eurozone reached lows of 0.3 per cent is further evidence of wider economic difficulties. Examples of slowing growth and in some cases contracting eurozone economies are already having a damaging impact on the Scottish economy and its exports."

Annual UK CPI inflation came in lower than expected in November, with economists having forecast a rate of 1.2 per cent. At one per cent, the annual UK inflation rate is only half of the target set for the Bank of England by the Treasury.

The downward influences on the annual CPI inflation rate between October and November came from transport costs. Petrol prices and air fares fell by more last month than in November 2013. Prices of second-hand cars fell in November but rose in the same month of last year.

In the recreation and culture category, prices of computer games rose by less last month than in November 2013.

On the old all-items retail prices index measure, annual inflation fell from 2.3 per cent in October to two per cent in November.