A leading business group has slashed its growth outlook for 2012 and urged the Government to start 'radical policies'.
The UK economy will shrink by 0.4% this year as the worsening global outlook hits businesses, the British Chambers of Commerce (BCC) said.
It had previously forecast 0.1% growth in UK.
"UK businesses have got what it takes to help the UK return to growth, but they can only do this if the Government acts quickly and radically to introduce both short-term stimulus measures and radical long-term policies for growth," it said in its quarterly economic forecast.
The BCC, which represents more than 100,000 firms, also revised down its growth expectation for next year to 1.2% from 1.9%.
This is despite businesses are reporting more positive trading conditions and expressing intensions to expand, it added.
It had more bad news for the construction sector, which it forecast to fall by 1.7% in 2012.
And unemployment is also likely to rise, the BCC said - by 186,000 people between the second and third quarter of this year.
The group called on the Government to change its economic strategy by giving bigger tax breaks for spending on infrastructure such as machinery, and lowering National Insurance contributions to encourage job creation.
And said the deficit reduction measures should continue - with spending cuts reallocating funds that could help boost investment.
"A new model economy for Britain cannot be summed up as "Plan A" or "Plan B," BCC director general John Longworth said.
He added that business wants a strategy that delivers both deficit-reduction and growth.
"This means a continued commitment to public spending cuts, support for the economy without a new and damaging consumer credit bubble, as well as a strong push to improve business access to finance and unlock massive private funding to renew Britain's infrastructure.
"Politicians need to get some political backbone and show leadership. If they put Britain above politics, they will be rewarded for it in the long run."
The forecast comes a day after a survey by the Confederation of British Industry (CBI) showed that business in Britain's service sector shrank between June and August.
Companies are now more negative about their business situations than they were three months ago, the CBI said, and expect business to get worse - making a rebound in the third quarter look unlikely.
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