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The claims have prompted the chambers to call for the Bank of England base rate to be cut quickly, in order to fend off a "prolonged recession".

In its quarterly economic forecast, the British Chambers of Commerce (BCC) said businesses were facing two very difficult years.

It forecasts UK unemployment levels will increase by between 250,000 and 300,000 individuals over the next two to three years to reach almost 2 million.

The BCC added the longer the Monetary Policy Committee (MPC) waits before cutting the Bank of England base rate, the bigger the danger that the situation will deteriorate.

BCC director general David Frost said: "Whilst a marked slowdown in activity is likely over the next 18 months, even if interest rates are cut when inflation peaks, the correct policy decisions are still needed to ward off the threats of a serious and prolonged recession."

The comments follow a survey by Merrill Lynch Survey which found that fewer investors around the world worried about inflation and more about global recession.

Economic Adviser to the BCC David Kern added: "Over the next two or three quarters, we expect UK GDP growth to be slightly negative or zero.

"Thereafter, we expect a shallow recovery, but the period of weak, below-trend, growth is likely to be prolonged, lasting until the final months of 2009 or early in 2010.

"Our view is that the threats to growth are more serious and more immediate than the risks of higher inflation. The UK economy urgently needs an interest rate cut to counter threats of recession."

Kern predicted bank base rate would be cut to 4.75 per cent in the forth quarter of 2008, followed by an additional cut to 4.5 per cent in the first quarter of 2009.