British Prime Minister Gordon Brown (left) gestures as Chancellor of the Exchequer Alistair Darling listens, during the prime minister's monthly news conference in February. - AP

A recession is likely to descend on the United Kingdom within the next six to nine months, the British Chambers of Commerce warned on Monday.

The national group, which represents local businesses, predicted that Britain would suffer from negative - or, at best, flat - gross domestic product growth over the next two to three quarters, meaning that the country will very likely be in the midst of a recession, technically defined as two or more consecutive quarters of shrinkage, by the beginning of 2009.

But, the chambers warned, the picture could be even more dire if the Bank of England doesn't cut interest rates as soon as possible in order to stimulate spending.

The Monday publication of the BCC's quarterly economic forecast was aptly timed, with two more studies coming out Monday giving hard evidence of a looming recession.

Slow retail sales

A leading London retail sales monitor, published by the British Retail Consortium, reported that sales growth in central London in July slowed to six per cent year-on-year, compared to last year's 13 per cent increase over 2006 for the same month.

Clothing, footwear, homeware and other discretionary items were hit particularly hard by the "squeeze on household budgets," it said.

Also on Monday, property website Rightmove said that house prices fell nearly five per cent year-on-year in August. The fall was the fastest since the company launched its monthly survey six years ago.

Rightmove said that the average asking price for homes had fallen by 2.3 per cent - or £5,403 (US$1,0810) - since last month.

In London, the average asking price for a house dropped by £21,000 (US$39,000) since July to £379,162 ($708,630).

The survey also showed the seventh consecutive monthly rise of unsold houses on estate agents' books, leaving them with a record average of 78 unsold properties on their books.

Miles Shipside, commercial director at Rightmove, said that the number of completed sales this year was in danger of falling to its lowest level since 1959.

The two new studies are yet more evidence - along data over the last month showing falling consumer confidence, rising inflation and contracting business growth - that Britain is indeed suffering from a economic slowdown.

Cut interest rates

In order to ward off the threat of a "serious and prolonged recession," said BCC Director General David Frost, the Bank of England needs to cut interest rates from the current five per cent to 4.75 per cent in the fourth quarter of this year, and to 4.5 per cent in the first quarter of next year.

Last week, Bank of England governor Mervyn King indicated that he was open to cutting rates as soon as inflation peaked at around five per cent - possibly later this year. But even if these rate cuts do come, the BCC is expecting unemployment to rise over the next 18 months to two years by as many as 300,000 people to over two million jobless for the first time in more than a decade.

"Once the present crisis is over and the economy recovers, the government must ... establish a more credible fiscal framework," said BCC economic adviser David Kern.