The UK economy is set to stagnate in the first quarter of the year but a "new recession is not a foregone conclusion", a business lobby group has said.
The British Chambers of Commerce (BCC) said gross domestic product is likely to be flat in the first half of the year, including one quarter of contraction, amid indications the "UK recovery is stalling".
Order book expectations at home and overseas are set to fall in the manufacturing sector, while unemployment will hit 2.77 million by the end of 2012, up from 2.64 million in the last official figures, the BCC added.
But John Longworth, BCC director general, said that while a slowdown in the eurozone is inevitable, Britain "need not suffer a similar fate".
"A new recession is not a foregone conclusion," he said. "However, action is needed urgently to tackle short-term stagnation and a lack of business confidence, damaged by the ongoing eurozone crisis."
The BCC's views echo those of the Bank of England, which forecast a heightened risk of recession in the first half of 2012 in its last quarterly report, as well as numerous forecasts, from the likes of the Office for Budget Responsibility, Organisation for Economic Co-operation and Development and National Institute of Economic and Social Research, which have forecast a slow start to the year.
The BCC said while the results of the survey of 7,580 businesses are concerning, they do not indicate a recession - two quarters of contraction - and are still better than those seen in the worst phase of the last downturn.
However, the worsening situation facing the eurozone poses a great threat for UK exporters and business confidence as a whole.
Mr Longworth urged the Government to move faster on promises made in the Chancellor's Autumn Statement, such as plans for a credit-easing programme.
He said: "The UK does have the potential to recover and make its way in the world. We have the talent, the energy and the enterprise. All we need is an environment that puts business first."
© 2012 Press Association