LONDON - CONSUMER confidence in Britain rebounded in October and for the first time this year as government attempts to shore up the banking system met with widespread relief, a leading mortgage lender said on Wednesday.

In its monthly survey, Nationwide said its consumer confidence index recorded a 4 percentage point increase in October to 55 per cent despite increasingly gloomy economic news, including warnings from both Prime Minister Gordon Brown and Bank of England governor Mervyn King that the British economy is heading for recession.

'The actions taken by the government and the Bank of England to support financial markets do seem to have buoyed consumers' confidence and could be responsible for the increased confidence in the future economic situation,' said Mr Fionnuala Earley, Nationwide's chief economist.

During October, the British government unveiled measures to support the banking industry, including buying stakes in ailing banks, while the Bank of England said it would boost short-term credits to banks and cut interest rates along with other banks around the world.

Despite the improvement during the month, Mr Earley thinks it will take time before confidence returns to the levels seen just a year ago of around 90 per cent, as the economy is heading into recession.

Rapid interest rate reductions from the Bank of England could support a recovery, said Mr Earley, who thinks the bank will most likely reduce its benchmark rate by three-quarters of a percent to 3.75 per cent from 4.50 per cent.

Most expect the bank to cut rates by a half percentage point, though there is growing speculation it may reduce interest rates by as much as a full percentage point for the first time since four cuts of that size in 1992-3 when Britain's economy was last mired in recession.

The index's base level is taken as 99 per cent at the survey's start in May 2004. It was based on interviews of 1,000 people between Sept 22 and Oct 19. -- AP