08 July 2008 | Paul Snell
The UK faces a "real risk" of recession, affecting both the manufacturing and service sectors.
A survey of 5,000 small and medium sized businesses by the British Chambers of Commerce (BCC) said the outlook for the UK economy was "ominous" with falls in firms' sales, orders and cashflow.
"The results signal a menacing deterioration in UK prospects. We are now facing serious risks of recession," said David Kern, economic adviser to the BCC.
"For the first time in many years, the vital results for domestic sales and orders, and for cashflow, have moved into negative territory for both manufacturing and services. The outlook is grim."
The BCC said the services sector was being hit harder than manufacturing, with indicators at levels not seen since the last recession in the early 1990s. Confidence in future turnover and profitability in both sectors also fell sharply.
Businesses in both sectors intend to increase prices, but the BCC argued falling demand and the squeeze on income would limit how high prices could be raised.
BCC director general David Frost said a recession could still be avoided, and the government should address concerns of business over new taxes and regulations.