BCC chief economist David Kern says: ‘The UK’s economic prospects remain uncertain, our recovery is fragile and risks of a relapse are high. Threats of a double-dip recession are greater in the near future than the dangers of higher inflation.’

The BBC says GDP growth is likely to average at just under 2 per cent per annum over the next four or five years, considerably less than the 2.7 per cent average growth recorded in the period 2003-07. ‘Against this background, it is vital to ensure that wealth-creating businesses have adequate capacity to respond to an upturn in demand when the recovery strengthens,’ adds Kern.

David Frost, BCC director general, says that the government must use the forthcoming Budget to encourage a business-led recovery: ‘If it fails to do so, the recovery will take longer to gain momentum and may even slip into reverse. New business taxes must be avoided and unnecessary red tape suspended.’

The predictions come as lobby group the Confederation of British Industry (CBI) calls for the government to balance public finances by 2016, two years earlier than planned, in order to create economic stability.

Richard Lambert, director general of the CBI, says: ‘It is critical that this Budget provides credibility and direction on the public finances, and creates the right conditions for businesses to drive economic growth.’