The UK is staring down the barrel of a "serious and prolonged recession", according to a gloomy report by the British Chambers of Commerce (BCC) this morning.
The employers' group predicted that up to 300,000 jobs would be axed by 2011 as the economy goes into reverse.
Despite previous warnings about job losses, this is the first business study to predict a technical recession – two consecutive quarters of negative growth.
With plummeting house prices, soaring fuel and food costs, and the credit crunch still restricting finance, the BCC called for decisive action.
Director-general David Frost said: "While a marked slowdown in activity is likely over the next 18 months, even if interest rates are cut when inflation peaks, the correct policy decisions are still needed to ward off the threats of a serious and prolonged recession.
"The longer the [Bank of England's] Monetary Policy Committee waits before cutting rates, the bigger the danger that the economic situation would deteriorate."
As well as interest rate cuts, the BCC called for a breach of the government's 'golden rule' that it will only borrow to invest, and insisted businesses should not be taxed more.