Pressure was mounting on Bank of England policymakers today to make the largest interest rates reduction in more than 15 years after data revealed more grim economic news.

Pressure was mounting on Bank of England policymakers today to make the largest interest rates reduction in more than 15 years after data revealed more grim economic news.

Experts said the case was growing for a 1% cut - the largest single move since January 1993 - amid deepening gloom in the key services and manufacturing sectors.

The Bank's Monetary Policy Committee (MPC) began its two-day rates meeting today as figures showed that service sector activity shrank at its fastest pace for at least 12 years last month.

The latest survey data from the Chartered Institute of Purchasing and Supply (CIPS) showed its business activity index fell to 42.4 in October, which is the lowest level since the poll began in 1996.

And the Office for National Statistics said manufacturers saw a much bigger than expected fall in activity in September as the sector's worst decline for nearly 28 years continued apace.

The official data showed an 0.8% fall in September, bringing the quarter-on-quarter decline to 1.3% in the three months to September.

Hetal Mehta, senior economic adviser at influential forecaster the ITEM Club, said: "Today's set of gloomy data surely means that the Bank of England must cut interest rates by more than 50 basis points tomorrow."

Business leaders are calling for a full 1% cut from the MPC when it delivers its decision tomorrow.

CBI deputy director-general John Cridland said: "We have talked to businesses of all shapes and sizes across the UK, and the need for a further rate cut is clear.

"The recession into 2009 will be both longer and deeper than expected, and we need the strong medicine of a full percentage point cut."

The MPC cut rates by 0.5% at the beginning of October in a co-ordinated emergency move by central banks around the world to head off the banking crisis.

But official figures since then have shown the alarming pace at which the economy is sliding into recession.

Output shrank by a worse than expected 0.5% between July and September - the first quarter of economic contraction since 1992.

The Federation of Small Businesses claims 1.5 million smaller firms risk going under and said the MPC would "send out the right message" with a 1% cut.

National chairman John Wright said: "This should hopefully encourage banks to lend and secure the future of millions of businesses.

"We don't want to head the way of the early 1990s when 1,000 small businesses a week were collapsing."

Interest rates, which were previously held at 5% for six months by the MPC due to inflation fears, are now set to tumble as recession fears take centre stage.

IHS Global Insight economist Howard Archer said there was a "compelling case" for the Bank of England to "get on with the job" with a full 1% cut.

"We expect interest rates to come down to 2% by mid-2009 and it is very possible that they could fall even further thereafter," he said.

MPC "hawk" Tim Besley - who was voting for hikes as recently as August - said rate cuts alone "will not be a magic bullet" and need to work in tandem with the bail-out of the banking sector announced last month.

The expected move lower may not offer struggling homeowners or business borrowers much immediate relief as those struggling lenders fail to pass on cuts in full.

More than half of mortgage lenders held back from passing on October's cut in full as they faced stubbornly high interbank lending costs.