Industry chiefs have braced Britain for a winter of business discontent, and warned executives not to expect a recovery until at least next autumn.

Digby Jones: "Difficult winter"

Digby Jones, director general of the Confederation of British Industry (CBI), said that the economic downturn was causing "suffering, real pain" at UK companies.

And, with the slowdown deepened and lengthened by the turmoil stemming from the terror attacks, Mr Jones repeated calls for a half a percentage point cut in interest rates.

He also urged the government to prepare an emergency package, including tax breaks, to aid businesses should the economy falter further.

'Difficult winter'

"I believe this will be a difficult winter," he told reporters at the start of the CBI's 25th annual conference, in Birmingham.

He saw the UK emerging from the slowdown in the July to September quarter next year, although firms would expect to feel the effects of the terror strikes for months longer.

"The effects will have run their course within, we hope, two to three years," he said

But, with the CBI nonetheless predicting UK economic growth of 2% next year, he maintained a stance of "cautious optimism".

"It's not doom and gloom across the piste," he said.

Bomb disruption

He was speaking as the centre of Birmingham remained closed by police following a car bomb on Saturday less than a mile from the conference venue.

Mr Jones said he had no information that the bomb was linked to the conference, and urged delegates not to cancel attendance because of the explosion.

"It is very, very important that this conference points to a message writ large... that terrorism will only win if events such as this stop because of it."

Body blow

The terror attacks have hit business prospects at almost two third of UK firms, with more than one quarter blaming a "significant" number of cancelled orders on the attacks, the CBI said, unveiling the findings of a survey of 249 executives.

"September 11 was a body blow to business," Mr Jones said.

He called for "benign regulation" over the aviation sector, one of the worst affected, to allow airlines more freely to exploit merger benefits reaped in other sectors.

"It is time they participated in that consolidation, to the benefit of businesses as well as the benefit of the nation."

The confederation also called for measures to support smaller listed firms which, while boasting a total market capitalisation of �125bn, are largely ignored by City fund managers and analysts.

"There is a vicious cycle of no research, no liquidity, no investment, no research," CBI deputy head John Cridland said.

Keynote speech

The comments came ahead of a keynote speech to a conference dinner on Sunday by Gordon Brown, Chancellor of the Exchequer.

Delegates will be looking to Mr Brown to reveal how he plans to balance Treasury budgets, without increasing levies, at a time when the economic slowdown is hitting tax revenues, Mr Jones said.

The conference will also want to hear from Stephen Byers, the Transport Secretary, how he plans to rescue the railways following the Railtrack crisis, Mr Jones said.