The economy is fragile, with business confidence low and unemployment barely improving, according to a survey of 6,000 businesses across the UK.
The British Chambers of Commerce's (BCC) Quarterly Economic Survey provides a snapshot of the economy between April and June 2011 - and predicts it will grow by only 0.3%.
Labour's Angela Eagle said the predictions mean that the Government will be off track to meet the expectations in the Office for Budget Responsibility's growth forecast.
"Economic growth of 2.6% in 2011, which was forecast before George Osborne's first Budget a year ago, now looks like an impossible prospect", the Shadow Chief Secretary to the Treasury said.
The warning comes after economists predicted that official GDP figures, due to be released later this month, will show that the economy contracted in the second quarter of 2011.
As European Council President Herman Van Rompuy prepares for an emergency meeting called to deal with the crisis in the Eurozone the troubling figures could well frighten markets.
The bad news for the Government does not end with the predictions of low growth. The BCC's survey also showed a "sluggish" domestic market, indicating businesses would be more likely to grow abroad than in the UK.
Commenting on the results, British Chamber of Commerce head David Frost said growth remained "too slow" and called on the government to help businesses.
"We accept the need to persevere with painful measures to cut the deficit. But the government must move beyond the rhetoric of growth, and introduce radical reforms to help businesses export, invest and create more jobs."
The criticism came as the House of Commons' Business Select Committee has produced a damning report questioning the Government's ability to support UK exports.
Chair of the Committee Adrian Bailey said there were real concerns about underinvestment.
"We all know that Departments have significant reductions to their budgets and BIS is no exception. However, we are not convinced that cutting the budget for business support is the right approach. If UKTI fails in its role as the key government support for business then the economy as a whole will suffer. This cannot be allowed to happen and the Government will need to convince us that it can deliver with less".
No wonder the public's confidence in the economy is at an all-time low: A ComRes survey, released last night showed over half of Britons believe the UK is heading for a double-dip recession and a record high of 61% of people believe the government is cutting public spending too much and too quickly.