The Bank of England has slashed interest rates from 0.75% to 0.25% in an emergency move to counter the “economic shock” of the coronavirus outbreak.

The Bank said the decision follows the spread of Covid-19, which has seen stock markets and shares plunge around the world.

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The move – which comes ahead of measures also expected in the Chancellor’s Budget on Thursday – sees rates taken back down to all-time lows, with the Bank also announcing extra action to bolster lending by billions of pounds to support households and businesses.

In a statement, the Bank said the package of measures would help the UK manage through an “economic shock that could prove sharp and large, but should be temporary”.

It is the first cut since August 2016 and the first unplanned rates decision since the 2008 financial crisis.

London’s FTSE 100 Index surged nearly two per cent in early trading after the cut.

The Bank said: “Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months.

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“Temporary, but significant, disruptions to supply chains and weaker activity could challenge cash flows and increase demand for short-term credit from households and for working capital from companies.

“Such issues are likely to be most acute for smaller businesses. This economic shock will affect both demand and supply in the economy. ”