In an interview with the FT ahead of the pre-budget report, the chancellor has warned that global economic instability is leading to turbulence at home.

As evidence of growing government borrowing emerges, Gordon Brown insisted the root of the UK's trouble lay abroad.

Forum Response: British Retail Consortium

Bill Moyes, director general of the British Retail Consortium, said: "The chancellor's comments in the FT today recognises what we have telling everyone for some time now - that consumer spending and the retail sector has been the strong, stable engine of growth for UK economy over the last 18 months.

"The UK economy has depended throughout 2002 on a strong performance by the retail sector. However, retailers need the right macro economic and fiscal environment to continue delivering growth and stability to the economy.

"Sales are now growing only at half the rate they were six months ago, so any further pressure on the cost base of business could seriously compromise retailers' ability to keep prices down - which is vital if they are to continue to improve value and deliver continuing consumer spending growth.

"The main dangers now are that, the chancellor will eat into personal disposable income which, will have a knock on effect on high street sales; and secondly that he will increase the taxation burden on the industry which retailers could not easily absorb. Either of these measures will have a serious effect on retail competitiveness. Both must be avoided."

Forum Response: Institute of Directors

A spokesman for the IoD told ePolitix.com: "We certainly agree with the chancellor that the world economic recovery is looking fragile and much of the optimism of the first half of the year seems to have dissipated.

"Although the UK has been one of the better performing economies, growth expectations have also weakened here.

"It is extremely likely that the chancellor will downgrade his GDP forecasts for 2002 and 2003 in next week's pre-budget report. The IoD does not expect GDP to grow by more than 1.5 per cent in 2002 and 2.5 per cent in 2003."

Forum Response: Construction Products Association

Allan Wilen, economics director at the Construction Products Association, told ePolitix.com: "The chancellor's comments indicate that the weaker world economic outlook has prompted the Treasury to downgrade its forecasts for tax revenues and increase public borrowing requirements. This should not be matched by cut backs in planned public expenditure.

"Under the government's own rules its current expenditure should match revenues over the economic cycle with public finances going into deficit when the economy weakens as it is at present. Furthermore, under the Treasury's golden rule the government is free to borrow to fund capital expenditure.

"We believe the chancellor should accordingly stick to his expenditure plans, especially for capital programmes. It is vital that the government maintains its commitment to these programmes as our analysis of government's delivery on its spending plans (see our Forum site for more information) already confirms that a number of areas are well behind schedule."

Forum Response: Business Services Association

Norman Rose, director general of the BSA, told ePolitix.com: "There has to be an inter-relationship between our economy and the world economy but Britain does tend to have a counter-cyclical economy.

"I think that while in some respects there is an effect, I think part of it comes down to the domestic downturn in the economy, with the stock market being depressed at the present moment, people less secure about jobs than they have been in many years. I think this is having as bigger effect as the global economy.

"Its interesting that if you look at Britain within Europe, then we're doing so much better. Business services itself within Europe is still growing at five times any other sector in the economy."