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• Institute of Directors calls for £50bn of new money • Fears of recession grow as industrial production falls Business leaders are urging the Bank of England to authorise another £50bn of quantitative easing when its monetary policy committee meets today in order to boost bank lending and prevent the economy slipping back into recession. The Institute of Directors says that without an extension of the current £200bn programme of money creation, there could be “dire consequences” for the government’s finances in lost taxes and higher social security spending. The warning follows figures from the Office for National Statistics that showed industrial production had unexpectedly contracted in July. The sharper than usual drop in output comes in the wake of a slide since the beginning of the year and numerous recent surveys suggesting that other sectors of the economy are losing momentum. Snapshots of the manufacturing and the services sector this week revealed the UK economy had slowed down to a point where many business leaders and economists fear the economy stands on the edge of a double-dip recession. Graeme Leach, chief economist at the Institute of Directors, said: “The time to launch QE2 has arrived. The downside economic risks are sufficiently great to warrant an extension in quantitative easing now, in order to avoid the risk of a double-dip recession. “We already have an L-shaped economic recovery and the hit to business and consumer confidence over the summer risks a slip back into recession, which could have dire fiscal consequences. Expanding QE by £50bn initially is a sensible and limited response.” The Bank of England’s monetary policy committee is expected to discuss a fresh injection of funds into the Bank’s quantitative easing programme after several of its members indicated they were warming to the idea. The growing clamour for a monetary response to the weak economic data followed a speech by the chancellor, George Osborne, in London, in which he said the government would stick to his tax and spending plans . Osborne said he would be downgrading his economic growth forecast and predicted a bumpy ride over the next year, but refused to accept criticism of his policies, which have been blamed for undermining business and consumer confidence. Jeremy Cook, chief economist at currency dealer World First, said that despite the clamour for QE, he expected the MPC would wait until November before reaching an agreement: “QE would represent a big shift in policy direction as it was only four months ago that three members of the MPC voted for an increase in interest rates. This is an indication of just how turbulent a summer it has been.” The European Central Bank, which also meets tomorrow to discuss monetary policy for the eurozone, is expected to keep its rates on hold at 1.5%. Thinktank The Work Foundation said the chancellor was abdicating his responsibilities by leaving policy to central bankers and private markets. In a report, Making the UK a Global Innovation Hub, it said Britain would need a 15-year plan directed by the government to put the economy on a more sustainable path. Will Hutton, a director of the Work Foundation and co-author of the report, said: “Britain’s patchwork of institutions, networks and public agencies is not fit for purpose. The state must take the lead on this because confidence among businesses is so fragile at present. The government has already recognised the importance of this agenda but the time has come to make it happen.” He said the task was to “create a network of institutions, processes and methodologies that will spur both the magic of innovation and the tough task of its development and commercialisation”. The thinktank has founded an offshoot, the Big Innovation Centre, supported by business donations, which will be launched by business secretary Vince Cable. Hutton added: “The private sector cannot shoulder the unknowable risks associated with the wholesale rebasing of the UK economy nor develop the appropriate architecture and networks alone. This requires the ongoing engagement of an enterprising state, harnessing the creative ability of both the private and public sector through open innovation. This cannot be done piecemeal. Britain needs to own this agenda and think big.” Quantitative easing Economics Interest rates Bank of England Phillip Inman guardian.co.uk