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A UK recession has started already and the outlook is getting worse as confidence "collapses", according to research from the British Chambers of Commerce (BCC) for the third quarter.

The quarterly report from the industry body found a collapse in confidence for both the manufacturing and services industries, with both at record lows not seen since 1989 when the series began.

The manufacturing expectations balance plunged ten points, to -11 per cent, the lowest since the fourth quarter of 1992, while in the service sector, employment expectations declined five points to three per cent, the lowest since the first quarter of 1993.

"The third quarter results support the view that a UK recession has started already, and the outlook is getting worse," the BCC said in a statement.

However, the balance of manufacturing firms reporting pressure to raise prices fell three points over the quarter, to +42 per cent.

In services, the balance of firms expecting to increase prices fell three points to +38 per cent.

Although the BCC said both balances remain at high levels by historical standards, any fall in price pressure will be a welcome sign for the Bank of England that inflation may have peaked.

The BCC is calling for a base rate cut when the Bank of England's monetary policy committee (MPC) meets this week.

"While a moderate recession is very probably unavoidable, the possibility of a deeper recession can be mitigated if the correct policies are adopted," the group warned.

The figures confirm data from the Chartered Institute of Purchasing and Supply (CIPS), which recently released data showing Britain's services and manufacturing sectors shrank at a record pace last month.