The UK economy is facing stagnation in the first quarter of 2012, according to forecasts from the British Chambers of Commerce (BCC), which released its quarterly economic forecast on Tuesday.
The BCC survey warned that its survey of more than 7,800 business showed declines in their order books, employment prospects, business confidence and investment intentions and in their financial position.
"The results of our latest survey are a cause for concern and point towards stagnation in the first quarter of this year. Many of the balances are now at levels last seen in the third quarter of 2009, meaning improvements seen in the last two years have largely been cancelled out," John Longworth, the BCC's director general said in a press release.
"A new recession is not a foregone conclusion. However, action is needed urgently to tackle short-term stagnation and a lack of business confidence, damaged by the ongoing eurozone crisis."
Although the UK's service sector showed some signs of growth, manufacturing reported its worst quarter in three years last week.
The continuing turmoil in the eurozone has hit exporters, the BCC said, with more manufacturers reporting declines than reporting increases in the final quarter of 2011. It was the same story in employment, with both manufacturers and service sector businesses, on balance, choosing not to expand their workforces.
Companies in the service and manufacturing sectors also reported that managing cash-flow remains a major issue.
"A fall in employment expectations points to risks of rising unemployment over the next year. We are predicting an increase in the UK jobless total to 2.77 million by the end of 2012," the BCC's chief economist, David Kern, said.
"Recession is still avoidable, but risks of a setback have increased. Most export balances are still positive. But the worsening international situation and the growing risks facing the eurozone will cause UK exporters difficulty.