UK is one quarter away from recession

The UK is at "serious risk" of heading into recession as rising costs and declining orders hit businesses, according to a new survey published by the British Chambers of Commerce (BCC).

The BCC said its latest quarterly economic survey had received a "record response" with nearly 5,000 small, medium and large businesses taking part.

The survey found manufacturing and service sectors hitting "historically low levels".

If these trends were to continue, the BCC said, the UK business sector was now only one quarter away from technical recession. An economy is officially in recession if negative growth is experienced in two successive quarters.

The BCC survey highlighted a number of issues, including cashflow in negative territory, confidence levels falling sharply in manufacturing and service sectors and home sales and orders at their lowest levels since the early nineties.

BCC director general David Frost, said: "These results show a real risk of recession in the coming months.

"The temptation for the Government will be to raise business taxes in the next pre-Budget report because the exchequer is running out of money. This would be a catastrophe.

"I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country: to put more pressure on business would not only restrict growth and hit the consumer hard, it would further crush what our economy is based on - confidence."

David Kern, economic adviser to the BCC, added: "A major recession can still be avoided, but forceful measures are needed to improve confidence.

"The Bank of England must resist misguided calls for higher interest rates. Indeed, if wage pressures remain muted, the option of early interest rate cuts must be considered.

"On its part, the Government must alleviate acute business concerns over new taxes and regulations, and must stand ready to support vulnerable small businesses."