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The Bank of England has reduced interest rates to a record low of 1% from 1.5% in an attempt to boost the shrinking economy.Lowest price ever

This marks the fifth interest rate cut since October, as the Bank seeks to encourage more lending.

However, there are concerns that savers will be hurt by lower interest rates.

And business groups argue that this rate cut will not be enough to ease the economic crisis, and will not encourage banks to lend.

The decision comes after official data showed the UK had entered a recession in December, after two successive quarters of economic contraction.

The Bank Rate has now been reduced from 5% in October last year.

In a statement, the Bank of England said that the rate cuts, along with government measures to boost the economy, “would provide a considerable stimulus to activity as the year progressed.”

Britain is experiencing a deeper recession than other countries because of the relative size of the country’s financial sector, finance minister Alistair Darling said Tuesday as he tried to deflect criticism of the government for the scale of the economic crisis.

“Because we have such a large financial services sector and also because of the nature of our housing market, we were bound to be affected to a greater extent than some countries,” Darling told a committee of the House of Lords.

Darling’s comments followed last week’s prediction from the IMF that Britain’s recession would be deeper than elsewhere. It forecast that Britain’s economy would contract by 2.8 percent this year, which would be the country’s worst performance since the 1930s, and more than the 2.5 percent predicted for Germany and the 1.6 percent penciled in for U.S.

In his last set of forecasts in November last year, Darling predicted that the British economy would contract by between only 0.75-1.25 percent and insisted that Britain was in a better position than other countries to weather the storm emanating from the seizing up of credit markets and the near collapse of the global banking system.

He is expected to downgrade his 2009 forecast in March or April when he delivers the Budget and will no doubt face criticism for underplaying the scale of the recession. Britain officially entered into recession — considered to be two consecutive quarters of negative growth — in the fourth quarter of 2008 when figures showed that it contracted by a massive 1.5 percent from the previous three month period.