The Bank of England has held interest rates at 5% despite growing evidence that the UK is heading for recession.

Business groups the British Chambers of Commerce (BCC) and the British Retail Consortium had argued for a rate cut to boost high street spending but with inflation likely to top 4% when the next set of figures are released, the monetary policy committee (MPC) decided against a cut.

"The MPC cannot ignore the fact that recession threats have worsened," said the BCC's economic adviser, David Kern.

"While the near-term rise in inflation is unavoidable, it is also temporary as weaker growth would clearly push down inflation sharply next year. Limiting the threat of a major recession must be the priority."

Manufacturing group EEF also warned that a cut would be needed "sooner rather than later" if the UK was to escape a full-on recession.

Many analysts expect inflation to hit 5% next year as rising energy prices kick in.