Falling orders and rising costs are tightening the squeeze on business, the British Chambers of Commerce has warned.
Services firms, which account for three-quarters of the economy, saw "alarming" declines in the second quarter of 2008, with those reporting lower orders outnumbering those recording rises for the first time since 1990.
The BCC quizzed almost 5,000 firms as part of its survey.
It found that business confidence was at its lowest since 1990.
The BCC's economic adviser David Kern said the survey showed a "menacing deterioration" in UK prospects.
Firms were equally gloomy about the prospects for the future.
The BCC warned the Government against hitting firms with more taxes in an effort to boost public revenues.
Director-general David Frost said: "The temptation for the Government will be to raise business taxes because the exchequer is running out of money.
"This would be a catastrophe.
"To put more pressure on business would not only restrict growth and hit the consumer hard, it would further crush what our economy is based on - confidence."
Firms are facing soaring costs from rising electricity bills and raw materials as oil approaches $150 a barrel, while banks hit by the crunch clamp down on lending.
This has put cashflow among UK firms under the most pressure since 1992, the BCC said.
Source: http://uk.biz.yahoo.com/08072008/140/uk-serious-risk-recession.html
