The Government has come under pressure for its economic policies after official figures confirmed Britain is in its longest double-dip recession on record.
The Office for National Statistics (ONS) has confirmed a GDP drop of 0.7% in the second quarter.
The estimate is far worse than forecasts for a 0.2% contraction and the steepest fall since the first quarter of 2009.
British Chambers of Commerce director general John Longworth said: "It is clear that Britain is in the midst of the most prolonged period of stagnation it has faced in decades.
"Ministers can't expect firms to bust a gut to grow if they fail to take a long-term approach to creating an enterprise-friendly environment."
The fall may be revised in coming months, but it suggests the UK is mired in the longest double-dip recession since quarterly records began in 1955 and it is believed to be the longest since World War II.
Statisticians have not been able to put a number on the impact of the additional bank holiday granted for the Queen's Diamond Jubilee - but have admitted it is a "significant" hit.
Further dampening comes from the sour summer and torrential downpours throughout April and June which dampened demand for clothing, food and leisure activities as the nation's builders struggled to get out to work.
This was underlined in the construction sector figures, which showed a mammoth 5.2% decline as the dismal weather stifled projects.
Chancellor George Osborne said the official figures were disappointing and confirmed the country's deep-rooted economic problems.
"We're dealing with our debts at home and the debt crisis abroad. We've made progress over the last two years in cutting the deficit by 25% and businesses have created over 800,000 new jobs," he said in a statement.
"But given what's happening in the world we need a relentless focus on the economy and recent announcements on infrastructure and lending show that's exactly what we're doing."
Although the GDP drop stunned economy watchers, the markets had an encouraging response, with the FTSE 100 (Euronext: VFTSE.NX - news) up around 0.3% in mid-afternoon trading before easing to close at 0.02% down.
The ONS said that output from the service industries including the financial sector was down 0.1%, manufacturing and other production industries were down 1.3% and construction fell 5.2%.
Shadow chancellor Ed Balls said the Government "should wake up and listen" and he told Sky News: "The figures speak for themselves and are truly shocking.
"It doesn't have to be this way. I do think that David Cameron and George Osborne need to wake up and listen."
TUC general secretary Brendan Barber has accused the Government of using hollow rhetoric over the worsening situation.
"They need to change course as their policies are causing permanent damage to our economy."
Institute of Directors senior economic adviser Corin Taylor said: "Today's figures come as a severe blow to business.
"The eurozone countries show that we absolutely cannot afford to waver from the deficit reduction programme, but there are several steps the Government must take to boost the economy through supply-side reforms."