Gross domestic product (GDP) growth is expected to slump to 1.7 per cent this year, the British Chambers of Commerce (BCC) believes.
Its economic forecast published today blames the global economy for the current situation and believes Britain's GDP will only recover to two per cent growth in 2009.
As a result BCC economic adviser David Kern is calling on the government to do all it can to limit the impact of the slowdown.
He says it may be necessary for prime minister Gordon Brown to breach his golden rule of not letting public debt exceed 40 per cent of GDP.
The Bank of England is also called upon to instigate quick interest rate cuts. Mr Kern warns a failure to do so will only exacerbate current difficulties.
"Small businesses are particularly vulnerable when the banking sector is under pressure, and the government may have to take special measures to support them if the credit crunch worsens," he said.
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